NEW YORK — Bank of America is still trying to shake off troubles arising from mortgages written during the housing bubble.
Higher fees from battling lawsuits and costs related to its mortgage business led to a 39 percent decline in B of A's first-quarter earnings, the bank announced Friday. It wasn't what investors wanted to hear, since just three months ago the bank announced several big charges and settlements that seemed to resolve many of its mortgage problems.
The Charlotte, N.C., bank earned $1.7 billion, compared with $2.8 billion in the first quarter of last year. Revenue fell to $26.9 billion from $32 billion in the same period last year.
"It seems like some of the mortgage-related issues that they said were behind them are actually not behind them yet," said Paul Miller, a bank analyst at FBR Capital Markets.
The bank is fighting lawsuits from investors and insurers who say that during the housing bubble they were duped into buying loans that were based on fraudulent documents. Bank of America set aside $1 billion to repurchase those mortgages and also added $352 million to its legal expenses in the first quarter.
"The numbers are getting worse, and nobody seems to have a handle on how bad this could be," Miller said.
B of A's stock fell 2.4 percent to $12.82. Bank of America has lost 34 percent of its value over the past year, making it the laggard among major banks.
Along with the 19 largest banks in the country, Bank of America was subjected to a "stress test" by the Federal Reserve to see if it was strong enough to stand up to another economic downturn. Only banks that passed the test were allowed to increase dividends. The Fed has asked the bank to submit a revised plan.
Brian Moynihan, chief executive of Bank of America, tried to cast his bank's results in a positive light. "All the businesses have moved back to profitability except our mortgage business," he said in a conference call with analysts. B of A's Merrill Lynch division set records for revenue, asset management fees and brokerage income.
On Wednesday, Bank of America was among 16 of the nation's largest mortgage lenders that were directed by the Federal Reserve and other federal banking regulators to reimburse homeowners who were improperly foreclosed upon. The Fed warned of more fines in the future.
Much of B of A's mortgage-related woes stem from its 2008 acquisition of Countrywide Financial Corp., once the largest U.S. mortgage lender, which was facing bankruptcy after payment defaults and foreclosures.
Last month, Bank of America suffered another setback when it became the only one of the four largest U.S. banks that wasn't allowed by the Federal Reserve to increase its dividends.