Bank of America earnings: Huge charges depress earnings

Tools

As the Bank of America stock rallied in 2012, it was tempting to say that the bank was finally putting the financial crisis and mortgage meltdown behind it.

It's even more tempting to say as much now, in the wake of its fourth quarter earnings release. The bank took massive charges, as expected, for settlements with Fannie Mae ($2.7 billion), other settlements including the foreclosure review agreement ($2.5 billion), litigation expense, mortgage insurance rescissions and various balance sheet adjustments including a DVA, all of which decimated revenue and earnings. And yet it managed to post earnings of $0.3 cents per share, which beat severely reduced expectations barely.

There were some other nuggets of good news. The provision for bad loans fell to $2.2 billion from $2.9 billion a year ago, and investment banking and wealth management were strong growers. Overall, the positive spin is that the bank has taken the big hits that it had to take and is now poised for growth in key markets, notably real estate. It has signaled its desire to reassert itself in consumer mortgages, for example. But that may take a while.

Its focus recently has necessarily been on remediation, and we wonder how easy it will be to ramp up into mortgage growth mode. I wish it well. If nothing else, it created some favorable comps for 2014. The pressure of a dividend hike continues to grow.

For more:
- here's the results