Bank of America still haunted by its past

The company's controversial acquisitions of Merrill Lynch and Countrywide are still dragging down its numbers.

By Jason Notte Oct 16, 2012 4:11PM

Bank of America Corp. signage is displayed outside of a branch in San Francisco, California David Paul Morris/Bloomberg via Getty ImagesLike Citigroup's (C) dismal earnings and chief executive Vikram Pandit's exit? You're going to love Bank of America's (BAC) third-quarter numbers.


Any optimism JPMorgan Chase (JPM) and Wells Fargo (WFC) gave banking investors Friday after reporting stellar profits and a surge in mortgage refinancing is being tempered by Citigroup's near-ignorance of the housing sector and Bank of America's wonky books. Analysts speaking to Reuters projected a net loss of $94.58 million for Bank of America, or 7 cents a share, on $21.89 billion in revenue. Analysts at Zacks were less kind, dropping Bank of America's earnings estimate from 13 cents a share to 0 cents. That's a 100% drop from 28 cents per share a year ago.


The fallout from the bank's Merrill Lynch purchase four years ago and a legal mess surrounding the mortgage underwriting practices of Bank of America's other 2009 acquisition, Countrywide Financial Services, are creating pressure that the bank's bottom line can barely withstand.


The latter issue affected Morgan Stanley (MS) analysts' decision to cut their earnings estimate for Bank of America in early October. Low interest rates are already squeezing the bank's margins on loans, but scrutiny of its home lending and lawsuits against Countrywide are stifling loan volume that helps the banks competitors overcome those tiny rates.


Bank of America, like other banks, used funds from the Federal Reserve to cover bad loans and bolster its numbers. Unfortunately for Bank of America, Wall Street Journal analysts say 46% of the bank's profits in the last four quarters came from Uncle Sam's handouts.


That puts Bank of America in a tough enough spot without another $1.6 billion to $1.9 billion charge against its earnings. But that's the hit Bank of America's going to have to take this quarter after agreeing to pay $2.4 billion to settle a shareholder lawsuit last month. The class-action suit was filed in 2009 and alleged that Bank of America misled investors about Merrill Lynch's financial well-being when it purchased the brokerage in 2009 for roughly $50 billion, or 70% more than its last share price.


Despite the overwhelming odds against it, Bank of America could still buck expectations with some help from the housing market. Freddie Mac's interest rates for 30-year fixed rate mortgages are still hovering around 3.4% and prompting a stream of refinancing and home sales for those fortunate enough to secure credit.


Existing home sales jumped 7.8% in August from the same time last year, while the national median home price has increased for six straight months to $187,000, according to the National Association of Realtors. That's 9.5% higher than it was during the same period in 2011 and supported by the S&P/Case-Shiller index of home values in 20 cities, which climbed 1.2% in July from the same time last year. That was the index's biggest 12-month jump since August 2010.


If that potential housing comeback helps mortgage holders and homebuyers look past Countrywide and consider Bank of America, it could help salvage the quarter and the bank's numbers going forward. Barring that, it's looking bleak for BAC.


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14Comments
Oct 16, 2012 7:39PM
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Bank of Unamerica has a projected loss of 94 million for a quarter.  Bank of UnAmerica paid out 4.4 BILLION dollars in just BONUSES to the top fat pigs in 2010, and even more in 2011.   A 94 million loss is comparing the salary of a bank teller to the top fat pig at Bank of Unamerica who makes $5000 per hour, and requires a teller to work 11 weeks to make what he makes in 60 minutes.

 

And they think the problem is the economy and that they can't rape consumers with debit card fees anymore is the cause of their downfall.

 

Cut their bonus pool to their fat pigs by 2% and that would roughly COVER their entire loss for the whole quarter.  But, can't do that.  Pigs need another vacation home, 4 more cars and a new helicopter.

Oct 16, 2012 6:33PM
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Bank of America is just reaping what it sowed! Now i can sit back and enjoy watching the train wreck with a big smile on my face. Next up........Chase Bank!
Oct 16, 2012 5:45PM
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Bank of America deserves to be haunted by its past. They have no soul. I know...I worked there...

Read chapter 2 of my firsthand account as a Bank of America whistleblower uncovering the largest bank fraud in history here: http://thoughtforyourpenny.blogspot.com/2012/07/the-boy-who-cried-force-placed.html

Oct 16, 2012 5:57PM
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A Criminal organization from the TOP ! Duping its employees and the American public/Consumer that they are there to HELP AS A FINANCIAL INSTITUTION ? They only care about one thing GREED MONEY AND POWER at whatever cost !  DIE BANK OF AMERICA DIE !!!!!!!
Oct 16, 2012 6:05PM
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There is no Housing comeback ! Bank of America is going OFF THE CLIFF !  Take your money out of this bank NOW ! Before you LOSE IT !!!!!!
Oct 16, 2012 7:32PM
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Several years ago, before the present debacle BoA started to accept Mexican ID cards issued by Mexican authorties as "official" evidence that the person in question was in the U.S. legally.  The plolicy until then had been to accept only US evidence of that.  BoA was after the fees it cvould collect for transferring money from here to Mexico.  Other banks quickly followed suit -- greed is very easily transmited from bank to bank -- and millions of US dollars were more easily moved and less easily traced to their  original depositosr.  A bad thing for our investigators.  The administration (Bush II) tried half-heartedly to prevent it, but to no avail.  The BoA should have re-named itself the Anti-Bank of America.  I hope it's too sleazy to get bailed out in any way.
Oct 16, 2012 11:18PM
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Stay away from BofA. Not a good company to deal with.
Oct 17, 2012 1:07AM
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BofA is a horrible bank that screws people.  I knew this over 40 years ago and avoid them like the plague.  I have been doing business with credit unions and have been treated very well.  No more big banks for me.
Oct 17, 2012 2:43AM
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F*ck off B of A. Go out of business...it will be a better world if you do.
Oct 17, 2012 6:21AM
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I would never use BOA for my banking but, I love BOA stock

I bought $100k worth of BOA stock when it dropped below $5.00 and sold at over $9.00

Now that I sold I don't care what happens to them.

I never let my personal feelings get in the way of a good investment.......If I can make money I don't care how they treat thier customers,nobody forced anybody to use thier services

Use em when you can!! (that's what BOA does)

At least that's the way I see it

Oct 16, 2012 10:52PM
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sun trust banks in florida caused me 12 months of grief. guess they all suffered from the same condition. gread.
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