Colin Barr

Following the money in banking, economics, and Washington

BofA posts $8.8 billion loss

July 19, 2011: 7:32 AM ET

Bank of America posted an $8.8 billion second-quarter loss as the biggest U.S. bank by assets tries to put its disastrous acquisition of Countrywide in the rearview mirror.

The Charlotte-based bank lost 90 cents a share in the quarter, reversing the year-ago profit of $3.1 billion, or 27 cents a share. Revenue, hit by $13 billion in mortgage litigation costs, plunged 54% from a year earlier to $13.5 billion.

Excluding the mortgage costs – including the $8.5 billion agreement BofA (BAC) reached last month to settle some mortgage-putback claims by big investors led by Pimco and BlackRock – BofA made $3.7 billion, or 33 cents a share, on revenue of $26.5 billion.

BofA's big mortgage business, which became the nation's biggest when then CEO Ken Lewis bought the notorious subprime mill Countrywide at a 2008 fire sale, posted a $14.5 billion loss in the latest quarter.

BofA gamely pointed out that this means the rest of its businesses made almost $6 billion in the latest quarter. But the figure is inflated by asset sale gains and debt sales, and it's not news that's likely to be all that well received by investors who have shown every sign of doubting current chief Brian Moynihan's leadership.

BofA shares fell below $10 Monday for the first time since the spring of 2009, when the stock market traded for half its current price and BofA was widely viewed as a candidate for a government takeover.

"Obviously, the solid performance in our underlying businesses continues to be clouded by the costs we are absorbing from our legacy mortgage issues," Moynihan said in a press release. "We intend to continue our efforts to put the mortgage uncertainty behind us, build capital through the strength of the franchise, and deliver the returns for shareholders that we owe them."

That statement is noteworthy because as recently as this spring, Moynihan was claiming BofA would be able to resume paying a modest dividend – a plan that was shot down by a Federal Reserve deeply concerned about the bank's financial strength. If anything those concerns have increased now that Europe is in free fall and the U.S. economy appears to be stalling.

But Moynihan has changed his stripes before, notably in the mortgage lawsuit mess in which he swung from a fighting stance last fall to a let's settle this one this summer. Like Ben Bernanke and his exit plan, Moynihan has had to make concessions to a grim reality that, for all his efforts, doesn't look likely to improve any time soon.

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About This Author
Colin Barr
Colin Barr
Senior Writer, Fortune

Colin Barr has covered finance for Fortune.com since November 2007. Previously he was a writer and editor for TheStreet.com, winning a 2006 Society of American Business Editors and Writers award for "The Five Dumbest Things on Wall Street," and for Dow Jones Newswires. He is a 1991 graduate of Penn State and lives in Port Washington, N.Y., with his wife Meena Bose and their two kids.

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