Bank of America’s fourth-quarter profit plunged 63% as the banking giant was weighed down by billions in charges related to a dispute with Fannie Mae and a foreclosure settlement. Revenue also fell, though some of the drop was attributable to accounting issues arising from the way the settlements were booked and changes in the value of the bank's debt.
Revenue dropped 25% to $18.66 billion as noninterest income fell 41%. Excluding $700 million of debit valuation and fair value option adjustments, and $3 billion for the cost of the Fannie Mae settlement, revenue was $22.6 billion. Overall, Bank of America reported a profit of $732 million versus a profit of $1.99 billion a year earlier.
On a per-share basis, which includes the payment of preferred dividends, the bank reported earnings of three cents versus 15 cents a year earlier. Analysts expected per-share earnings of two cents on revenue of $21.03 billion.
In settlements announced last week, Bank of America agreed to pay $11.6 billion to Fannie Mae tied to so-called putbacks, the loans that Fannie demands lenders buy back as a result of questionable underwriting and other missteps. The agreement covers nearly a decade of home loans and is the bank's latest response to the hangover from its 2008 acquisition of Countrywide Financial, which was the largest U.S. lender to customers with spotty credit histories. The bank took a $2.7-billion pre-tax charge in the fourth quarter related to the deal.
Bank of America (BAC : NYSE : US$11.28), Net Change: -0.50, % Change: -4.24%, Volume: 321,516,060