How Did Bank of America Stay Positive Last Quarter?

A careful look at the news in the past couple weeks would have shown Bank of America (NYSE:BAC) wading through some sticky situations, or sticky litigation, that cost the bank billions. Now, a report of their quarterly earnings shows just how much money got “stuck” and taken from the bank.

Settlements and charges

One of the bigger settlements that faced Bank of America was the $10.3 billion dollar settlement with Fannie Mae over troubled mortgages. Under the terms of the settlement, Bank of America would give Fannie Mae $3.6 billion, while also spending $6.75 billion to buy back mortgages. This news was expected to leave the bank with a fourth-quarter net loss of $2.5 billion.

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The bank also had to fork out $2.5 billion to settle regulators’ claims of foreclosure abuse. Another settlement totaling $2.43 billion was reached with shareholders last fall over accusations that Bank of America had misled investors about Merill Lynch’s health when it was taken over by BofA. Though smaller than the other payments issued in 2012, another $700 million was charged to the bank based on its perceived improvement in debt…

Better news, better numbers

In spite of all the charges it faced, the bank came out with numbers that showed it was seeing a boost in its health. Many of the settlement costs hit hard on the fourth-quarter earnings, with a 63 percent decline in profit compared to a year earlier. The banks earnings reached $732 million, which came out to 3 cents a share, beating estimates of 2 cents a share.

Revenue for the fourth quarter was $18.7 billion — a drop of 25 percent from the year earlier. The drop can be attributed to the number of payments the bank had to make in its settlements. It’s estimated that without the charges, Bank of America might have posted revenue of $22.6 billion for the quarter.


Further signs that Bank of America is recovering can be seen in its annual profit, which rose from $1.4 billion in 2011 to $4.2 billion in 2012. The bank is also seeing fewer delinquent loans and reporting huge gains in wealth management. Further looking to improve the health of the bank, servicing rights to many of the bank’s loans are being sold off to streamline and improve efficiency.

Investing Insights: Bank of America Earnings: Moving in the Right Direction?