BoAML recovery hit by crisis-era mortgage costs

 
Tim Wallace
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BANK of America Merrill Lynch’s (BoAML) profits recovered strongly through 2012, the institution reported yesterday, though mortgage charges hit profits in the last quarter.

Profits came in at $4.188bn (£2.62bn) for 2012, almost three times the $1.446bn recorded in 2011.

Over the past three quarters mortgage origination has grown by an average of 10 per cent, while client balances in wealth management rose seven per cent and total deposits rose 1.6 per cent to $1.05 trillion.

Costs have also been slashed – the bank cut headcount by 14,601 on the year to 267,190, contributing to a six per cent fall in expenses.

And the bank continued to build up capital levels, with the crucial ratio under incoming Basel III rules estimated at 9.25 per cent, up from 8.97 per cent in the third quarter.

But fourth quarter profits slumped to $732m, down 63.2 per cent from $1.991bn in the same period of 2011.

That is largely down to a $2.7bn blow from legal fees and compensation paid to Fannie Mae to end a long-running row over bad mortgages it sold to the state agency, and a $1.1bn provision for the independent foreclosure review settlement.

“We addressed significant legacy issues in 2012 and our strengths are coming through,” said chief financial officer Bruce Thompson.

“Capital and liquidity remain strong and credit continues to improve. Our primary focus this year is to grow revenue, manage expenses and drive core earnings growth.”

The bank’s shares dropped 4.24 per cent on the weak fourth quarter numbers.