Thursday, October 27, 2011

Bank of America Reports Q3 Net Income of $6.2 Billion

Bank of America reported Tuesday that it saw a profit of $6.2 billion, or 56 cents per share, during the third quarter of 2011. That compares to a loss of $7.3 billion, or 77 cents per share, in the year-ago period.

The third-quarter numbers= were impacted by what the back described as “significant items,” including a $4.5 billion pretax gain resulting from an accounting adjustment related to structured liabilities, similar to what was seen in Citi’s and JPMorgan’s latest earnings releases. The year-ago quarter included a $10.4 billion goodwill impairment charge.

Perhaps the biggest headline-grabber gleaned from BofA’s third-quarter numbers is the fact that the company lost its position as the largest U.S. bank by assets. BofA’s balance sheet shows $2.22 trillion in assets as of the end of September. That puts it in the No. 2 spot behind JPMorgan Chase, which reported $2.29 trillion in assets at the end of the third quarter.

“This quarter’s results reflect several actions we took that highlight our ongoing transformation toward becoming a leaner, more focused company,” said CEO Brian Moynihan.

On the mortgage side of the business, BofA funded $33 billion in residential first mortgages during the third quarter to over 151,000 homeowners. Approximately 47 percent of this money was for home purchases and 53 percent were refinances.

The company’s provision for credit losses declined 37 percent from the year-ago quarter. BofA says the reduction reflects “improved credit quality across most consumer and commercial portfolios and underwriting changes implemented over the last several years.”

During the third quarter of this year, Bank of America completed more than 52,000 loan modifications. That’s down from 69,000 in the second quarter of 2011, but up from 50,000 in the third quarter of 2010.

The company says it successfully implemented the rollout of a single point of contact (SPOC) for mortgage default servicing over the July-to-September period. More than 6,500 BofA employees have now been trained and deployed for SPOC positions.

The bank continues to grapple with legacy mortgage issues as they relate to repurchase claims by investors.

During the second-quarter of this year, the company put aside $14 billion to cover expected buyback demands — $8.6 billion for the private-label settlement proposed to trustee Bank of New York Mellon and another $5.4 billion in the event that other claims arose from the settlement. The BNY Mellon proposal has faced heavy opposition from some of the private investors involved and has yet to be approved.

At the same time, Bank of America told investors Tuesday that loan buybacks from Fannie Mae and Freddie Mac have become “increasingly inconsistent” with what the bank feels it is contractually obligated to cover. Outstanding claims from the two GSE’s currently stand at over $5 billion.

How about sharing some of those profits by giving homeowners reasonable loan modifications?

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