Bank of America reportedly earned $2.5 billion, or $0.19 a share, compared with analysts’ projections of $0.14 for the quarter. The bank reported revenue of $22.2 billion for the second quarter, slightly less than expected and below the level in the first quarter of this year. The latest figures are a sharp contrast to Bank of America’s results for the same period a year earlier, when mortgage-related charges contributed to an overall loss of $8.8 billion, or $0.90 a share.
The bank increased its projected cost-cutting targets, predicting an additional $3 billion in savings by mid-2015 under its “New BAC” restructuring initiative. Bank of America plans to cut more than 30,000 workers as New BAC goes into effect. Its head count was down 3,228 as of June 30 and the bank has 12,600 fewer employees than it did a year ago. The bank’s chief executive Brian Moynihan said during a call with analysts, “We’re starting to see results from the New BAC program. We continue to have work to do.”
The housing problems of the past few years are still taking a toll on the bank’s earnings. Investors arguing that soured mortgages were improperly underwritten and sold are increasing their demands that Bank of America repurchase them. These claims totaled $22.7 billion in the second quarter, up from $16.1 billion in the first quarter.
The $22.7 billion figure is more than double the total of such claims in the second quarter of 2011, around $9.9 billion. Chris Kotowski, an analyst with Oppenheimer, said, “It’s not just that it’s going up, it’s going up at an accelerated rate. It’s hard to know what the ultimate cost will be.”
A large percentage of the losses from soured mortgages originated from Bank of America’s acquisition of leading subprime lender Countrywide Financial in 2008. Bank of America said the number of mortgages flagged as more than 60 days late declined in the second quarter, which may be a sign of healthier conditions for borrowers. Overall credit losses dropped to $1.7 billion in the second quarter, down from $3.25 billion in the period a year earlier.