* Q2 earnings $0.19/share vs $0.32 year earlier
* Litigation expenses $4 bln vs $471 mln a year earlier
* Revenue from fixed income, currencies and commodities
rises 5 pct
* Shares fall 2 pct
(Adds details on bond trading, negotiations with Dept of
Justice, links to BREAKINGVIEWS, factbox)
By Peter Rudegeair and Tanya Agrawal
July 16 Bank of America Corp said
second-quarter profit fell 43 percent, a bigger decline than
analysts had expected, after the bank posted $4 billion of
litigation expenses linked to mortgage disputes following the
The expenses included a $650 million settlement with
American International Group and money it set aside for
an expected settlement with the Department of Justice. Bank of
America has already agreed to pay $50 billion to settle
disagreements stemming from the market meltdown in 2008.
The bank's shares fell 1.9 percent to $15.50 in early
The expenses far exceeded the $471 million in legal charges
the bank posted in last year's second quarter, although it was
less than the $6 billion it recorded in this year's first
Higher legal costs overshadowed the increased profits that
many of the bank's main businesses posted. Retail banking
earnings, including credit cards, rose 28.5 percent to $1.79
billion. Commercial and investment banking profit rose 4.3
percent to $13.5 billion, thanks in part to a record quarter in
"The sins are seven years old and the things that are going
on in the future look bright," said Bill Smead, chief investment
officer of Smead Capital Management, a Seattle-based investment
firm that owns around 2.6 million shares in Bank of America.
Sales and trading profit jumped 14.44 percent to $1.1
billion, helped by a 5 percent increase in revenue in bond
trading to $2.4 billion, excluding an accounting adjustment.
Higher revenues in trading corporate, mortgage and municipal
bonds help Bank of America avoid the double-digit declines in
bond trading that rivals JPMorgan Chase & Co and
Citigroup Inc experienced.
The second-largest U.S. bank said on Wednesday that earnings
for common shareholders fell to $2.04 billion, or 19 cents per
share, in the three months ended June 30 from $3.58 billion, or
32 cents per share, a year earlier.
Analysts on average had expected earnings of 29 cents per
share, according to Thomson Reuters I/B/E/S. It was not
immediately clear which expenses should be excluded from the
bank's results to most directly compare to estimates, but the
posted results fell short of the average forecast, Thomson
Reuters I/B/E/S said.
STANDOFF WITH JUSTICE DEPT
Bank of America has been negotiating a multibillion dollar
settlement with the Department of Justice to resolve
investigations into the sale of mortgage-backed bonds.
A person familiar with the matter said that Bank of America
representatives, including general counsel Gary Lynch, met with
Justice Department lawyers on Tuesday, but no progress was made
towards a deal. The person is not authorized to speak publicly.
The bank has offered to settle for about $12 billion, while
the Justice Department has suggested $17 billion, sources
familiar with the matter have said.
The Wall Street Journal reported on Wednesday that Bank of
America had offered to settle for $13 billion, but did not say
when that offer was made. The bank declined to
comment on the report.
After the settlement with AIG and others, "we feel like we
have gotten a large chunk of this behind us," said Bank of
America Chief Financial Officer Bruce Thompson on a conference
call with reporters.
He added that, "clearly, the DoJ is the most significant
matter out there that is remaining."
(Reporting by Tanya Agrawal and Peter Rudegeair; Additional
reporting by Aruna Viswanatha; Editing by Ted Kerr and Phil