BofA misses estimates as mortgage banking weighs on results

Bank of America Corp. reported first-quarter profit that missed analysts’ estimates as lower mortgage banking income and higher legal costs slowed the firm’s turnaround. The shares dropped 3% in early trading.

Net income advanced to $2.62 billion, or 20 cents a share, from $653 million, or 3 cents, a year earlier, according to a statement today from the Charlotte, North Carolina-based company. The consensus of 25 analysts surveyed by Bloomberg had predicted 23 cents a share.

Chief Executive Officer Brian T. Moynihan, 53, has sold more than $60 billion in assets, settled more than $40 billion in mortgage claims and repaired the bank’s balance sheet since taking over in 2010. He’s now focused on trimming $8 billion in annual expenses and adding revenue, which dropped 8.4% on an adjusted basis to $23.9 billion.

“It’s going to be very hard for these banks to generate revenue, and mortgage is continuing to shrink,” Chris Whalen, managing director at Carrington Investment Services LLC, an asset manager in Greenwich, Connecticut, said in an interview. “The regulatory environment for mortgage is so hostile.”

Mortgage Banking

Lower mortgage banking income and declining gains from the sales of debt securities weighed on results, the bank said. The quarter included a $500 million settlement of claims tied to faulty home loans. Last year’s first-quarter profit was reduced by $4.8 billion in pretax-accounting charges.

The net loss at consumer real estate services widened in this year’s quarter to $1.31 billion from $1.14 billion a year earlier. Adjusted revenue slipped at the unit while noninterest expenses climbed 4.5% to $4.06 billion and margins narrowed, the bank said.

Profit from global banking slipped 15% to $1.34 billion as the provision for credit losses increased. In the markets division, income fell 20% to $1.39 billion excluding the impact of accounting charges.

“As they’re fighting back the losses, they’re doing a good job,” said Marty Mosby, an analyst at Guggenheim Securities LLC in Memphis, Tennessee, who has a buy rating on Bank of America’s shares. “What’s becoming more apparent is that the core earnings power is still under pressure.” Mosby’s firm manages assets that include Bank of America stock.

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