BofA Risks Reporting Loss on Mortgage Accord, Portales Says

Apr 25, 2014 12:39 pm ET

(Updates with Countrywide in third paragraph.)

April 25 (Bloomberg) -- Bank of America Corp. could post a second-quarter loss because of costs tied to resolving federal and state probes into the sale of mortgage bonds, according to Portales Partners LLC.

The lender may incur as much as $5 billion in litigation expenses in the period ending June 30, wiping out a previous earnings-per-share estimate of 25 cents, Charles Peabody, a Portales analyst in New York, wrote today in a research note. Peabody cited a Bloomberg News report that U.S. prosecutors are seeking more than $13 billion from the company.

Bank of America, the second-biggest U.S. lender, has posted four quarterly losses under Chief Executive Officer Brian T. Moynihan as he cleans up the mess caused by his predecessor’s purchase of Countrywide Financial Corp. The firm’s surprise $276 million first-quarter deficit was driven by $6 billion of costs tied to resolving mortgage disputes.

The lender may face about $20 billion in total costs tied to the probes, including $6.3 billion already paid to the Federal Housing Finance Agency in an accord last month, Peabody wrote. Consumer assistance could account for $6 billion, sapping future earnings, he wrote.

That could hamper the bank’s plans to repurchase stock, said Peabody, who has the equivalent of a sell rating on Bank of America shares. Jerry Dubrowski, a spokesman for the Charlotte, North Carolina-based firm, declined to comment on the research report.

Bank of America fell 1.5 percent to $16.09 at 12:26 p.m. in New York, the third-worst performance in the 24-company KBW Bank Index. The lender’s shares had climbed 5 percent this year through yesterday.