Business Blog Posts

The largest U.S. bank lost more than $2.39 billion in its home loan business as revenue fell and expenses rose. The foreclosure mess that began in the fourth quarter of 2010, with borrowers accusing major banks of repossessing homes without having the right paperwork in place, was a key source of higher costs in the quarter.

The bank also announced a new chief financial officer.

The first-quarter results give some inkling of why the Federal Reserve told the bank in March to rein in its plans to boost dividends, even as competitors were authorized to hike their payouts.

"Bank of America is further behind. And the reason they're further behind is because of what's going on with the mortgage business," said Ben Wallace, analyst at Grimes & Co, with $1 billion under management.

The bank said in March that it did not expect its mortgage business to return to normal earnings until 2014 or later, while most of its other businesses are seen recovering by 2013.

Bank of America shares were down 1 percent to $12.99 in morning trading. The shares fell 1.5 percent after JPMorgan Chase & Co's results on Wednesday showed the pressure facing consumer lending businesses.

JPMorgan, the second-largest U.S. bank, said it suffered extraordinarily high losses on mortgage-related issues in the first quarter. "Unfortunately, these losses will continue for awhile," said JPMorgan Chief Executive Jamie Dimon.

Bank of America did manage to earn $2 billion in the latest quarter, its first profit since the second quarter of 2010. It faced big mortgage and card-related losses throughout the second half of last year.

Its Merrill Lynch brokerage business provided a bright spot in the quarter, reporting sharply higher revenue and client assets as well as a net increase of nearly 200 financial advisers.

Bank of America, built through a series of acquisitions over decades, made an ill-fated purchase in 2008 when it bought mortgage lender Countrywide Financial Corp as the financial crisis was intensifying. The purchase gave Bank of America more subprime mortgages, home equity loans, and other assets that have generated big losses. The bank needed two government rescues during the financial crisis; it has repaid the money it received.

Chief Executive Brian Moynihan, who took the helm in early 2010, is trying to fix the bank by cutting costs and selling more products to retail customers, but he faces as uphill battle.

Bank of America's results are closely tied to the health of U.S. consumers, who have been reducing their debt as they wrestle with stagnant wages and high unemployment. The Charlotte, North Carolina-based bank does business with one of every two U.S. households.

The bank's loan book fell 8.5 percent in the first quarter from the fourth quarter, to $932.43 billion, due mainly to a decline in consumer loans.

Moynihan has put new people in charge of many areas of the bank, but changes are already underway in the executive suite. On Friday the bank said Bruce Thompson, its chief risk officer, will become chief financial officer by the end of the second quarter. The current CFO, Charles "Chuck" Noski, will become vice chairman of Bank of America.