Make us your home page
Instagram

Investors worry as Bank of America posts $9.1 billion loss

NEW YORK — Things keep getting worse for Bank of America.

On Tuesday, the largest U.S. bank reported a loss of $9.1 billion during the second quarter, mainly due to an $8.5 billion settlement with investors. That agreement, reached in June, settled claims that the bank had sold the investors poor-quality mortgage bonds. The bank had already announced several other settlements this year. The total so far to settle investor claims: $12.7 billion.

The large settlements and protracted losses related to mortgage loans are causing investors to worry about something bigger: Bank of America's overall financial strength. In a conference call to discuss the earnings report, analysts grilled the bank's executives.

At the top of their list of concerns is whether the bank will need to raise more money to comply with new international requirements that large banks hold more capital. If Bank of America needed to boost its capital reserves, it might look to raise more money by issuing more common shares of its stock. That would dilute the value of stock owned by current shareholders.

The stock is already down more than 35 percent for the year, and it is the only large bank whose shares trade below $10 per share.

Bank of America CEO Brian Moynihan tried to ease those worries. He said that the bank's finances were stronger between March and June than they were in the same period last year.

"Investors are clearly not convinced that Bank of America is in a comfortable position financially," said Shannon Stem, financial services analyst for Edward Jones, a financial advisory firm. "The margin of safety is clearly lower than at other banks, which leaves them more exposed to an economic slowdown or shock to the financial system."

Investors already had cause for concern. In addition to the huge settlements, in March, the Federal Reserve didn't allow Bank of America to increase its dividend, citing uncertainty about the depth of its mortgage problems. It was the only denial issued among the four largest U.S. banks.

In the quarter, the bank set aside an additional $1.9 billion to fight litigation from investors. That brought the total mortgage-related charges in the second quarter to $20.7 billion. The bank does not disclose the total amount that it has in reserve for litigation costs.

The bank's revenue declined 54 percent to $13.2 billion from $29.1 billion in the same period last year. Excluding charges related to investor settlements, Bank of America Corp. earned $3.7 billion, or 33 cents per share. That compares with net income of $3.1 billion, or 27 cents a share, in the same quarter last year.

One bright spot for the quarter: More of the bank's customers paid loans on time. That led to a 60 percent decline in the amount of money the bank puts aside for credit losses from last year. Loan losses in its consumer businesses dropped for the fifth consecutive quarter.

.Fast facts

Other bank earnings

• Wells Fargo & Co., the nation's largest mortgage lender, reported Tuesday it earned $3.73 billion in the second quarter, a 30 percent leap from a year earlier, boosted by the release of a big chunk of the money set aside to cover defaulted loans and foreclosed mortgages. But the San Francisco bank reported a sharp decline in the number of new mortgages it wrote, reflecting the ongoing weakness in the housing market and a drop in refinancing activity.

• Goldman Sachs more than doubled its profit last quarter, to $1.05 billion, but even that wasn't enough to satisfy its investors. The results announced Tuesday came in well below what analysts were expecting because of a sharp drop in bond and currency trading. The 63 percent slump in that business from the previous quarter was much worse than the declines of 18 percent and 20 percent at rivals JPMorgan Chase and Citigroup. Goldman attributed the decline to investors being nervous about global economic issues.

Investors worry as Bank of America posts $9.1 billion loss 07/19/11 [Last modified: Tuesday, July 19, 2011 10:33pm]
Photo reprints | Article reprints

Copyright: For copyright information, please check with the distributor of this item, Associated Press.
    

Join the discussion: Click to view comments, add yours

Loading...
  1. Heights Public Market to host two Tampa Bay food trucks

    Business

    TAMPA — The Heights Public Market announced the first two food trucks for its "rotating stall," which will feature new restaurants every four months. Surf and Turf and Empamamas will be rolled out first.

    Heights Public Market is opening this summer inside the Tampa Armature Works building.
[SKIP O'ROURKE   |   Times file photo]

  2. Author Randy Wayne White could open St. Pete's biggest restaurant on the pier

    Food & Dining

    ST. PETERSBURG — The story begins with Yucatan shrimp.

    St. Petersburg Deputy Mayor Kanika Tomalin, pilot Mark Futch, Boca Grande, St. Petersburg Mayor Rick Kriseman, and author and businessman Randy Wayne White,  Sanibel, exit a Maule Super Rocket seaplane after taking a fight around Tampa Bay off the St. Petersburg waterfront, 6/28/17.  White and his business partners are in negotiations with the City of St. Petersburg to build a fourth Doc Ford's Rum Bar & Grille on the approach to the St. Petersburg Pier with a second event space on the pier according to White. The group met near Spa Beach after a ground breaking ceremony for the new pier. "We want to have our business open by the time the pier opens," said White. Other Dr. Ford restaurants are located on Sanibel, Captiva and Ft. Myers Beach. SCOTT KEELER   |   Times
  3. Guilty plea for WellCare Health Plans former counsel Thaddeus Bereday

    Business

    Former WellCare Health Plans general counsel Thaddeus M.S. Bereday pleaded guilty to one count of making a false statement to the Florida Medicaid program, and faces a maximum penalty of five years in federal prison. A sentencing date has not yet been set, acting U.S. Attorney W. Stephen Muldrow of the Middle District …

    WellCare Health Plans former general counsel Thaddeus M.S. Bereday, pleaded guilty to one count of making a false statement to the Florida Medicaid program, and faces a maximum penalty of five years in federal prison. A sentencing date has not yet been set, acting U.S. Attorney W. Stephen Muldrow of the Middle District of Florida stated Wednesday. [LinkedIn handout]
  4. DOT shows alternatives to former Tampa Bay Express toll lanes

    Transportation

    TAMPA — State transportation officials are evaluating at least a half-dozen alternatives to the controversial Tampa Bay interstate plan that they will workshop with the community for the next 18 months.

    Florida Department of Transportation consultant Brad Flom explains potential alternatives to adding toll lanes to Interstate 275 during a meeting Wednesday at DOT's Tampa office. Flom presented seven diagrams, all of which swapped toll lanes for transit, such as light rail or express bus, in the I-275 corridor from downtown Tampa to Bearss Ave. [CAITLIN JOHNSTON | Times]
  5. Claim: State pressured CFO, used secret recordings to shut down Universal Health Care

    Banking

    ST. PETERSBURG — The founder of St. Petersburg's Universal Health Care alleges that Florida regulators conspired with the company's chief financial officer to drive the once high-flying Medicare insurer out of business.

    Federal agents raided the headquarters of Universal Health Care in 2013, ordering employees to leave the building. The insolvent St. Petersburg Medicare insurer was then in the process of being liquidated by state regulators.
[DIRK SHADD   |   Times file photo]