Bank of America profits take a tumble on huge legal costs

Tim Wallace
Follow Tim
PROFITS were battered by litigation payouts dating from acquisitions made at the height of the financial crisis, Bank of America said yesterday.

Last month it agreed to pay $2.4bn to settle claims it hid crucial information from shareholders when it bought Merrill Lynch.

But despite the $1.6bn charge booked in the quarter, the bank still recorded a profit thanks to tough staff cuts and rising lending to retail customers.

Profits came in at $340m, down 95 per cent on the year.

On top of the litigation expenses, the bank was also hit by a UK tax-related charge of $0.8bn.

Total revenues slid 28 per cent on the year to $22.66bn. Consumer revenues dropped on new debit card interchange fee rules, while average loan balances fell and the wider low-interest rate environment hit earning opportunities.

However, it cut headcount by 16,145 on the year to 272,594, driving personnel expenses down 4.9 per cent to $8.43bn, helping to keep the bank in the black.

And the bank’s provision for credit losses fell by $162m on a sharp improvement in delinquencies and bankruptcies.

However there may still be some legal costs to come – chief finance officer Bruce Thompson said disagreements with state-backed Fannie Mae are ongoing.