CHARLOTTE, N.C. -- Bank of America said Wednesday that it made a profit of $3.4 billion in the first three months of this year, a reversal from the loss it reported a year ago when it posted much higher legal costs.
The Charlotte-based bank reported lower revenue in the first quarter, as income fell in four of its five business segments. But it also posted much lower legal expenses than a year ago, when a settlement with the Federal Housing Finance Agency marred its results.
Its litigation expenses came to $370 million for the first three months of this year, down from $6 billion during the same period a year ago.
The first-quarter profit of 27 cents per share fell short of Wall Street estimates for earnings of 29 cents per share. In the first quarter of 2014, the bank lost $276 million, or 5 cents per share.
The shares fell 18 cents, or 1 percent, to close Wednesday at $15.64.
Bank of America Chief Executive Officer Brian Moynihan on Wednesday also said that Terry Laughlin, a veteran executive who previously has run mortgage servicing operations, will lead the bank's efforts to resubmit its annual capital plan to the Federal Reserve in September.
In March, as part of annual stress tests for big banks, the Fed approved Bank of America's request to repurchase $4 billion in common stock but said the bank must also address "deficiencies" and "weaknesses" in its capital-planning process.
It's a critical task for Moynihan and the bank, which has stumbled in three of five stress tests. Last year, the bank received Fed approval to raise its quarterly dividend to 5 cents per share, only to later disclose that it had miscalculated its capital ratios. The bank had to delay the dividend increase until the Fed approved a resubmitted capital plan.
The annual stress tests are designed to make sure big banks have enough capital to weather a severe economic downturn. Banks must meet minimum capital requirements and show they have sufficient planning processes.
"We simply have to be the best at [the stress tests] to meet our shareholder objectives in our company," Moynihan said during a conference call with analysts.
Laughlin already has hired outside experts and beefed up internal staffing, Moynihan said. The bank also has had "in-depth discussions" with regulators about the issues it must fix, he said.
Moynihan brought Laughlin, a former FleetBoston Financial colleague, to Bank of America in 2011 to help clean up mortgage-related problems inherited from the bank's Countrywide Financial acquisition. After the bank disclosed its miscalculated ratios last year, he also tapped Laughlin to shepherd last year's resubmitted capital plan.
Passing stress tests has become a key benchmark for bank CEOs. Analysts suggested Citigroup CEO Michael Corbat would lose his job if the bank failed a second straight exam this spring. The New York-based bank received Fed approval.
Investors have been closely watching Bank of America's expenses, which have been a drag on its earnings. In addition to costs to resolve litigation since the financial crisis, Bank of America has had high expenses in its unit that services delinquent mortgages.
"Expenses were managed well" in the first quarter, Chief Financial Officer Bruce Thompson told reporters during a conference call Wednesday. But he added that "expense management remains a key focus across the company."
One way the bank is lowering expenses is by trimming its workforce. The bank said it had about 220,000 employees at the end of March, down nearly 19,000 from a year ago.
Moynihan said that puts the bank close to its 2008 employment levels, before its purchases of Merrill Lynch in 2009 and Countrywide Financial in 2008. Bank of America said it had nearly 285,000 employees at the end of March 2009, after the Merrill deal had closed.
Business on 04/16/2015