Bank of America (NYSE:BAC) reported a net loss of $276 million (5 cents per diluted share) in its first-quarter earnings before the market opened on Wednesday, down from $1.48 billion (10 cents per diluted share) during the same period last year.
The biggest factors that negatively affected earnings were falling mortgage originations and the bank’s litigation expenses, totaling $6 billion pretax (40 cents per share post-tax). Bank of America shares fell 2 percent in premarket trading and continued to drop after the bell rang.
Bank of America’s net revenue on a fully taxable-equivalent basis was $22.77 billion, a 3 percent slide from $23.41 billion last year. Excluding net debt valuation adjustments, revenue fell 4 percent, from $23.55 billion to $22.7 billion, and exceeded analyst expectations of revenue sliding to $22.32 billion (5 cents per share), according to a survey by FactSet.
The second-largest bank in the U.S. reported a net loss attributed to shareholders of $514 million (5 cents per share) from a profit of $1.1 billion last year. Mortgage production revenue for the quarter ending March 31 was $207 million from $815 million a year ago. The bank pulled back slightly on granting home loans, at $10.8 billion from $11.6 billion last year.
However, Bank of America’s revenue from its Global Banking division rose from $4.03 billion in 2013 to $4.27 billion. As a result of passing this year’s stress tests, Bank of America received the Federal Reserve’s permission to increase its quarterly dividends to 5 cents from 1 cent, as well as repurchase $4 billion in common shares.
The bank’s deposit balances increased $38 billion from the same period last year to reach $1.13 trillion. Long-term debt fell $25 billion year over year, mostly related to maturities and liability management, and non-litigation expenses fell 6 percent. Its mortgage portfolio fell from $1.18 trillion to $780 billion.
The Charlotte, North Carolina-based bank’s $6 billion litigation expenses, up from $2.2 billion during the same period last year, includes a previously announced settlement with the Federal Housing Finance Agency, as well as additional funds earmarked for legacy mortgage-related issues. Bank of America settled seven of nine associated lawsuits and expects to resolve the remaining two within 45 days.
Last month, Bank of America agreed to pay $9.5 billion to end claims that the bank sold faulty mortgage bonds to Freddie Mac and Fannie Mae, and a judge recently approved a $8.5 billion settlement to mortgage security investors. Earlier this month, Bank of America was ordered by a New York court to pay a minimum $772 million settlement to end allegations that the bank misled customers in credit card marketing materials, as well as charging for credit monitoring services that were never received between 2010 and 2012.
Despite Bank of America’s earnings loss, it still outperformed competitors JPMorgan Chase (NYSE: JPM), which reported a 19 percent loss this earnings season due to an 8 percent revenue drop, and Citigroup (NYSE: C), which posted an 18 percent loss.
JPMorgan, the largest bank in the U.S., underperformed analyst expectations when it announced revenue loss during its earnings report last week; the bank’s shares dropped nearly 4 percent by the close of market the following day. On Monday, JPMorgan announced quarterly dividends for certain non-cumulative preferred stocks, to be paid on June 1.
Citigroup surpassed Wall Street’s expectations in its earnings report, released Monday, with $3.9 billion in profit ($1.23 per share) and revenues of $20.1 billion. Analysts had expected the bank’s earnings to be $1.14 per share.
Citigroup’s net losses included a $1.25 billion settlement to mortgage investors, as well as a $235 million expected loss due to loan fraud in its Mexican unit, which lowered investor sentiment along with the bank failing the second round of the Fed’s annual stress tests, barring Citigroup from increasing quarterly dividends. The bank’s earnings were 4 percent higher from the same period last year, its best since 2008, and shares rose 4.4 following the news.
Wells Fargo (NYSE:WFC) was the only one of the “Big Four” to report an earnings gain this quarter, with a $5.9 billion profit ($1.05 per share). This was a 14 percent increase from last year and exceeded analyst expectations of 96 cents per share, mainly due to decreased expenses and lower loan losses. Wells Fargo announced upon passing this year’s stress tests that it would be raising quarterly dividends to 35 cents per share.