Mortgages plague Bank of America earnings

Bank of America missed estimates for first quarter earnings partly due to mortgage settlements and lower mortgage income.

By TheStreet Staff Apr 15, 2011 4:23PM

By Maria Woehr, TheStreet

 

Bank of America's (BAC) lackluster first quarter earnings performance can be summed up in two words: mortgages fallout.

 

The bank reported first quarter earnings of $2 billion, or 17 cents a share, missing Thompson Reuters analysts estimates of 27 cents a share.

 

Results were weighed down by a $38.5 billion settlement the bank reached with monoline insurer Assured Guaranty (AGO) that resolves its outstanding and potential repurchase claims against BofA. The agreement includes a cash payment of $1.1 billion to Assured Guaranty, and a loss-sharing reinsurance arrangement that has an expected value of approximately $470 million.

 

"This agreement is an important step towards resolving non-Government Sponsored Enterprise legacy issues on terms beneficial to our company," said Terry Laughlin, legacy asset servicing executive in a statement issued Friday.

Separately, Bank of America reported a net loss of $2.4 billion in consumer real estate services compared, to a net loss of $2.1 billion for the first quarter in 2010. Revenue declined by $1.4 billion, and noninterest expense increased by $1.6 billion from the year-ago quarter.

 

Sterne Agee analyst Todd Hagerman had predicted that mortgage banking income for the quarter would be $1.4 billion for the first quarter of 2011 compared to the $1.5 billion reported during the same period last year. He estimated mortgage banking will bring in $6.6 billion in total for the year, a slight increase from $5.7 billion last year.

 

"Mortgage is again becoming another, "why bother" issue for the sector. Narrowly, everyone has to run screens on whose quarter may suffer from lower revenues. Broadly, mortgage fines, consent orders and lawsuits lead to tighter underwriting, which leads to lower home prices because no one can get a mortgage," said Nomura analyst Glenn Schorr.

 

Bank of America reported that factors in the decline in mortgage banking income include a $487 million increase in the representations and warranties provision, a $534 million decrease in service charge income from overdraft policy changes, a decline of $943 million from fair value adjustments related to structured liabilities and tighter credit spreads.

 

While provisions for credit losses decreased to $1.1 billion from $3.6 billion in the year-ago quarter from improving delinquencies and lower net charge offs, fewer home sales and more legal issues plagued the balance sheet.

 

Including the monoline settlement, representations and warranties provisions were $1 billion in the first quarter of 2011, compared to $526 million in the first quarter of 2010.

Analysts had predicted that losses from mortgage repurchases for the quarter would increase after JPMorgan Chase (JPM) reported losses of $420 million for the first quarter, up from $349 million in the fourth quarter.

 

Related Articles

2Comments
Apr 18, 2011 5:11AM
avatar
BOA IS THE WORST BANK EVER KNOWN TO MAN KIND . THEY ARE CONFUSED , SLOW,THEY DON'T HAVE A CLUE WHAT THERE JOB IS . THEY LIE OVER AN OVER I WILL NEVER LET THEM HANDLE ANY  OF MY FINANCES IN THE FUTURE I ALMOST LOST EVERYTHING I HAVE WORKED FOR
Apr 17, 2011 5:50PM
avatar
I hope BAC fails at everything the do, they are the worst company in the world. SCUM of the earth management.
Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

120
120 rated 1
268
268 rated 2
439
439 rated 3
709
709 rated 4
641
641 rated 5
609
609 rated 6
640
640 rated 7
516
516 rated 8
272
272 rated 9
152
152 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
EXCEXELON CORPORATION10
TAT&T Inc9
VZVERIZON COMMUNICATIONS8
CTLCENTURYLINK Inc8
AAPLAPPLE Inc10
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.