Newspaper article International Herald Tribune

Bank of America's Strong Quarter Fails to Satisfy ; Shares Fall as Investors Continue to Worry about Mortgage Litigation Costs

Newspaper article International Herald Tribune

Bank of America's Strong Quarter Fails to Satisfy ; Shares Fall as Investors Continue to Worry about Mortgage Litigation Costs

Article excerpt

Despite a substantially better quarter than a year earlier, shares dip as earnings disappoint Wall Street.

Bank of America reported first-quarter earnings on Wednesday that were significantly higher than a year earlier but fell well short of Wall Street's expectations.

Through midday trading in New York, the shares had declined by 6.35 percent to $11.50.

The bank made 20 cents a share in the first quarter, compared with 3 cents in the period a year earlier. But analysts were expecting a profit of 23 cents. Bank of America, second only to JPMorgan Chase among U.S. banks when measured by assets, had revenue of $23.5 billion in the first quarter.

Since the financial crisis, Bank of America's performance has been hurt by large mortgage-related losses. But in recent months investors have been betting that the bank would regain its footing. Before the drop Wednesday, the bank's shares had risen nearly 40 percent in the last 12 months. Earlier this year, regulators approved the bank's plan to buy back stock, a clear sign that they felt the lender was on firmer ground.

In a statement Wednesday, Brian T. Moynihan, Bank of America's chief executive, said, "Our strategy of connecting our customers to all we can do for them is working."

The question now is how the latest earnings will affect the recent optimism surrounding the bank, which lends to individuals and companies and has a large Wall Street presence through its Merrill Lynch unit.

Other large banks have reported earnings that exceeded analysts' estimates this quarter, so Bank of America's failure to do likewise may unnerve some investors. The debate will be over whether the bank fell short because of deeper issues that will be hard to resolve, or because of items that will have less of a negative effect as time passes.

Much uncertainty surrounds the cost of litigation relating to bad mortgages. …

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