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Bank of America earnings fall on $4 bn in legal bills

AFP

A man withdraws cash from a Bank of America automated teller machine in Hollywood on October 24, 2012A man withdraws cash from a Bank of America automated teller machine in Hollywood on October 24, 2012

A man withdraws cash from a Bank of America automated teller machine in Hollywood on October 24, 2012A man withdraws cash from a Bank of America automated teller machine in Hollywood on October 24, 2012

Bank of America Wednesday reported a 43 percent drop in second-quarter earnings weighed down by heavy litigation costs in the aftermath of the housing bust.

Earnings fell to $2.0 billion in large part due to $4 billion in litigation expenses.

But the bank pointed to lower non-litigation expenses and reported gains in some categories, including investment banking fees.

"The economy continues to strengthen, and our customers and clients are doing more business with us," said chief executive Brian Moynihan.

"Among other positive indicators, consumers are spending more, brokerage assets are up by double digits and our corporate clients are increasingly turning to us to help finance business expansion and merger activity. We are well positioned for further progress."

All of the big US banks have faced extensive legal costs after the financial crisis, as US regulators and private investors seek redress for mortgage-linked securities that sank in value after the housing bust.

Bank of America in the first quarter of 2014 reported a loss of $276 million following a $6 billion legal charge to settle mortgage-related lawsuits.

Bank of America is in talks with the US Justice Department on another big settlement to settle allegations it misled investors.

The bank said the latest legal charge relates "to previously disclosed legacy mortgage-related matters."

The bank announced it would pay a $650 million settlement to insurer AIG on mortgage-backed securities.

Bank of America's earnings translated into per-share profits of 19 cents, compared with analyst forecasts for 29 cents per share. The legal expense shaved 22 cents per share from earnings.

Revenues fell 4.3 percent to $21.96 billion, above the $21.62 billion forecast by analysts.

Shares fell 1.1 percent to $15.64 in pre-market trade.

Date created : 2014-07-16