Bank of America swung to a first-quarter loss of $276 million, as legal expenses related to the financial crisis mounted.
The bank said on Wednesday that its litigation expenses increased to $6 billion in the quarter, showing how Bank of America is still paying for its mortgage missteps nearly six years after the financial crisis.
Its quarterly loss of $276 million, or a loss of 5 cents a share, was in sharp contrast with a profit of $1.5 billion, or earnings of 10 cents a share, it posted in the period a year earlier. Analysts polled by Bloomberg News had been expecting earnings per share of 5 cents.
“The cost of resolving more of our mortgage issues hurt our earnings this quarter,†Brian T. Moynihan, the bank’s chief executive, said in a statement. “But the earnings power of our business and customer strategy generated solid results and we continued to return excess capital to our shareholders.â€
First-quarter profit was weighed down by $6.3 billion that the bank paid last month to settle a lawsuit arising from troubled mortgage-backed securities it bundled and sold to Fannie Mae and Freddie Mac before the financial crisis.
The bank agreed to pay that sum to settle a lawsuit filed by the Federal Housing Finance Agency on behalf of the two government-sponsored mortgage finance firms. As part of the settlement, Bank of America will also repurchase mortgage securities from Fannie and Freddie that are valued at about $3.2 billion.
The agreement covers so-called private-label mortgage-backed securities sold by Bank of America and its affiliated entities, like Countrywide Financial and Merrill Lynch.
Bank of America continues to grapple with the legal fallout from the mortgage lending debacle. The settlement with the Federal Housing Finance Agency concludes one of the bank’s largest legal liabilities, but there are other large pending cases that could continue to weigh on future earnings.
Excluding the legal expenses, the bank’s results mirrored those of its Wall Street peers like Citigroup and JPMorgan Chase.
Bank of America’s fixed-income trading operations suffered from declining client demand and low interest rates - a fate none of the largest Wall Street firms has escaped in the first quarter. The bank’s fixed-income trading fell 2 percent in the first quarter from the period a year earlier, a drop that was not nearly as steep as at some of its peers.
On the consumer side, the bank’s profits increased, spurred by lower losses on loans and growth in newly issued credit cards. Overall loan values were down, as the bank continued to run off its legacy portfolio.
Despite the high legal expenses, which the bank flagged to investors last month when it settled with the federal housing agency, the first quarter was a milestone in the bank’s efforts to put its troubled past behind it.
After its capital plan passed the Federal Reserve’s stress test last month, Bank of America announced that it was raising its dividend for the first time since the financial crisis.
The bank’s shares are up roughly 35 percent over the last year, outperforming many of its rivals.
