October 15, 2014 / 11:12 AM / 3 years ago

Bank of America moves past worst legal costs, posts loss

(Reuters) - Bank of America Corp (BAC.N) said on Wednesday that it has moved past the worst of its legal settlements linked to the financial crisis, after its latest big legal charge brought the bank's common shareholders a net loss for the third quarter.

Since 2010, the second-largest U.S. bank has agreed to pay at least $70 billion to resolve disputes linked to home loans, mortgage bonds and other problems stemming from before and during the crisis.

In the most recent settlement, the bank paid $16.65 billion to resolve Department of Justice charges that it misled investors in its mortgage bonds. Money was already set aside to cover most of that, but the bank took a $5.6 billion charge in the third quarter to cover the rest.

"The DoJ settlement from everything we can see was the most significant matter that’s out there," Chief Financial Officer Bruce Thompson told reporters, signaling that investors can stop fearing outsized legal settlements every quarter.

Investors have wondered when the settlements would stop. Chief Executive Brian Moynihan, who added the role of chairman in October, has been working to resolve legal and regulatory woes since he took over in 2010.

Four of the bank's five main businesses were profitable. Mortgages, where it booked the settlement charge, were the exception.

"While it was a messy quarter, core results look okay," Citigroup analyst Keith Horowitz wrote in a note to investors.

Bank of America's shares fell 5.6 percent as the broader stock market dropped.

The logo of the Bank of America is pictured atop the Bank of America building in downtown Los Angeles November 17, 2011.Fred Prouser

The bank is the fourth of the six major U.S. banks to report third-quarter results. JPMorgan Chase & Co (JPM.N) and Citigroup Inc (C.N) were also hit by big legal expenses.

Bank of America posted a net loss attributable to shareholders of $70 million, or 1 cent per share, for the three months ended Sept. 30, compared with a year-earlier profit of $2.22 billion, or 20 cents per share.

Net income before preferred stock dividends fell to $168 million from $2.5 billion.

The bank lost 3 cents per share on an adjusted basis, according to a calculation by Thomson Reuters. Analysts on average had expected a loss of 9 cents per share.

Trading Revenue Rises

Total revenue slipped 1.5 percent to $21.21 billion while expenses excluding legal costs were down 7 percent compared to the same period a year earlier.

Bond trading revenue, excluding accounting adjustments, rose 11 percent to $2.2 billion as market activity picked up in September, exceeding the increase that rivals have posted.

Profit from wealth and investment management rose 12.9 percent to a record $813 million. Global banking and sales and trading units achieved profit growth of over 20 percent.

Reporting by Peter Rudegeair in New York and Tanya Agrawal in Bangalore; Editing By Ted Kerr, Dan Wilchins, and David Gregorio

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