Bank of America reported a slim quarterly profit on Wednesday after doling out huge payments to settle legal claims stemming from the financial crisis.
The bank on Wednesday reported $340 million in net income, down from the $6.23 billion profit it notched in the same period a year earlier. The results of zero cents a share exceeded the estimates of analysts polled by Thomson Reuters, who had forecasted a loss of 6 cents.
The bank's revenue dropped 28 percent to $20.6 billion. The results reinforced concerns that Bank of America, the nation's second-largest by assets after JPMorgan Chase, has struggled to produce top-line growth since the 2008 financial crisis.
The bank did, however, record improved investment banking revenue and income, a bright spot for the bank. Mortgage originations also grew, as interest rates remained at near record lows.
And the otherwise bleak third quarter results were widely expected. The bank last month announced a $2.43 billion deal to settle accusations that it misled investors about the acquisition of Merrill Lynch during the depths of the crisis. Bank of America warned investors that the class-action payout, along with a British tax bill and an accounting adjustment related to the value of its debt, would slash 28 cents a share from third quarter earnings.
“Our strategy is taking hold even as we work through a challenging economy and continue to clean up legacy issues,†Brian T. Moynihan, the bank's chief executive, said in a statement.
The results reflect the murky nuances of Bank of America's balance sheet. Investors have struggled to find a coherent narrative amid quarter after quarter of conflicting numbers.
In the third quarter of this year, the bank racked up a $1.6 billion litigation expense paying for part of the Merrill Lynch settlement and other lawsuits. It also incurred a $1.9 billion charge on the perceived improvement in its debt, an accounting-relat ed cost that actually indicated greater public confidence in the stability of the bank. A final charge related to a tax expense that cost the bank $800 million.
Bank of America notes that the loses were baked into estimates, skewing the bank's true performance. But the third quarter of 2011 told a misleading story, as well, with one-time gains masking an overall modest performance.
The mixed reports come as other banks report generally strong earnings. JPMorgan Chase and Wells Fargo last week recorded major profit gains on the back of a booming mortgage business.
