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Click on individual bank names in the table below to access American Banker's coverage of each company's earnings report. Links to relevant coverage, filings, releases, and bank benchmark profile data can be found in the Related Links area of each article.
April 29 -
Charles Noski has stepped down as chief financial officer of Bank of America Corp. a year after taking the job because of "the illness of a close family member," Chief Executive Brian Moynihan told analysts Friday.
April 15 -
For other banks, the trouble lies in what wasn't in JPMorgan Chase's numbers: Growth in fees and loan interest. Only the investment bank posted higher revenue.
April 13 -
Questions about M&A are likely to dominate first-quarter conference calls among regional banks in the coming weeks. But beyond the standard "we're open to opportunities" line from executives, the real story will be in the numbers.
April 12 -
Banks' old problems kept easing in the first quarter. Their new problems didn't. That's what analysts expect to hear from JPMorgan Chase & Co. and Bank of America Corp. this week as they kick off quarterly results.
April 10 -
Concern about stock and bottom-line performance seems on the rise again, with CEOs preoccupied with the idea of returning capital to shareholders and replacing fee income.
April 5
The shaky economy is making it difficult for Bank of America Corp. to shrug off its mortgage woes, and dampening returns from business lines that might offset the lopsided burden.
“The legacy costs, they just cannot get this behind them. Every quarter they try to reassure the Street that ‘Most of this is behind us,’ but they’re having trouble dealing with it,” said Paul Miller, head of financial services research at FBR Capital Markets. “We’ve been factoring roughly $1.5 billion [of mortgage repurchase-related costs] a quarter — we’re going to have to look at taking those numbers up.”
Among the hits the company took in the first quarter was a $1.6 billion settlement with Assured Guaranty Ltd., a monoline insurer that had backstopped a portfolio of Bank of America home equity and first-lien loans. Bank of America ate an additional $548 million of unreimbursable expenses and fines related to its handling of Fannie Mae and Freddie Mac loans, and another $1 billion of repurchase-related costs, much of it tied to the government-sponsored enterprises. The tab suggests that B of A’s mammoth fourth-quarter settlement was not as conclusive an end to repurchase claims as many analysts had hoped. And analysts appear to assume that further, and possibly larger, settlements in the mold of the Assured Guaranty deal may be in the works.
Weakness in the housing and residential lending markets also hampered the mortgage division’s progress. B of A announced it was laying off 3,500 employees, 2,000 contractors and 1,500 regular employees, based on slackening originations.
Additional declines in the price of housing took their toll. The $1 billion provision for representation and warranty claims was higher than it would have been without the fall, which B of A expects to continue at a reduced rate in the current quarter.
“As far as [the house price index] going forward, we expect gradual improvement over the second half of the year,” Chief Executive Brian Moynihan told analysts, though he cautioned gains would be modest.
Moynihan sought to define the mortgage matters as a large, but isolated, problem.
“It’s a fairly simple picture: All of the businesses have moved back to profitability except our mortgage business,” he told analysts on a conference call. If investors set aside the slew of legal settlements, loan repurchases and other charge¬offs, Moynihan said, “we can see clearly how we build a bridge to the $45-$50 billion level” of normalized earnings that the company has promised to investors.
The company played up its first profit ($2 billion) in three quarters, but it fell well below analysts’ expectations. Like JP¬Morgan Chase & Co., which reported Wednesday, Bank of America’s earnings relied mostly on declining credit-loss provisions. Those provisions fell to $3.8 billion in the first quarter, from $5.1 billion in the fourth quarter. Revenues fell by 16%, to $26.9 billion, from a year earlier.
Of Bank of America’s six divisions, the only one to report increased revenue year over year was the company’s wealth and investment management division.
In the company’s investment banking unit, revenue was down from the industrywide robust numbers reported a year ago. But a 24% increase in investment banking fee income helped offset some of the decline.
That achievement came with a price. Personnel costs increased $1.4 billion as a result of greater compensation, much of it higher pay for brokers and investment bankers. “We have to take the costs down across the board as the economy continues to plug away,” Moynihan said.
The declining revenues in core banking are in keeping with the rest of the industry, Miller said.
“They’re not growing loans, nobody is,” Miller said. “And they’re not able to until they’re out of the housing crisis.”
The earnings included a few bright spots. The bank’s net interest margin, at 2.67%, did not fall as far as either the bank or analysts had expected. Deposits rose 4% from a year ago, a $44 billion increase. According to outgoing Chief Financial Officer Chuck Noski, the company remains on track to cut its overall debt by 20% relative to the third quarter of 2010.
Bank of America’s shares dropped slightly more than 2% on Friday, and some observers stayed cautious.
“Our largest initial concern is that the magnitude of mortgage-related items may not decelerate as rapidly as we have been expecting,” wrote Sandler O’Neill analyst Jeff Harte, whose estimate of $150 million in repurchase claims was dwarfed by the $1 billion tab, even before the $1.6 billion set aside for the Assured settlement. Aside from the litigation and mortgage expenses, Harte said, the other surprise was the $1 billion decline in fee revenues.
