Bank of America (BAC) Friday reported a loss of $1.6 billion in the fourth quarter after its costs related to soured home loans increased.
Bank of America Corp.'s loss available to shareholders after paying out dividends was 16 cents per share. Analysts surveyed by FactSet had forecast the bank would earn 18 cents a share. Excluding a charge of $2 billion related to the home loans, the bank would have earned 4 cents a share. A year earlier, Bank of America had reported a loss of $5.2 billion.
The bank reported revenue of $22.4 billion for the quarter, compared to $25.1 billion in the previous year.
Bank of America also kept aside an additional $4.1 billion for bad home loans that it could be forced to buy back from Freddie Mac and Fannie Mae and other investors and another $1.5 billion for litigation expenses. Investors say that the bank should take back the bad home loans because they were sold on improper documentation.
It was an attempt by the bank to leave behind its issues related to problem home loans that came along with its 2008 purchase of Countrywide Financial, the country's largest mortgage company at the time. Besides buying back bad loans, several banks were stung by accusations in the fourth quarter that they failed to properly review documents used in foreclosures. That led Bank of America to halt foreclosures in all 50 states.
"Last year was a necessary repair and rebuilding year," said CEO Brian Moynihan.
The results of the nation's largest consumer lender stand as a proxy for the health of the people's finances. And Bank of America's results echoed what other banks have been reporting earlier in the week that the fiscal health of the American people is improving.
For the sixth consecutive quarter, there were fewer people that were late meeting monthly payments. The bank's losses from lending in its credit card and home loan business declined $414 million from the third quarter of 2010, because of a drop in delinquencies and bankruptcies.
For the full year 2010, the bank reported a loss of $3.6 billion, compared to a loss of $2.2 billion in 2009.
Bank of America's shares were down 27 cents, or 1.9 percent, in pre-market trading Friday.
What are Penny Stocks
The lucrative and dangerous world of penny stocks.View Course »