Bank of America, one of the nation’s largest financial institutions, reported a steep drop in profits on January 17, 2013, for the recent quarter end.
According to Business Week, Bank of America witnessed a 63 percent plunge in bottom line net income due mainly to declining sales and issues with mishandled mortgage loans. The loan impact came from bad management of foreclosures and continued problems with bad debt relating to existing mortgage loans.
Official statistics for the fourth quarter show Bank of America net income falling to $732 million, or 3 cents per share. The same quarter one year prior showed $1.99 billion in net income or 15 cents per share. Sales revenues fell 25 percent, dropping from $24.9 billion to $18.7 billion, one of the largest declines ever for this financial institution.
Looking for something positive in the fourth quarter financial results, Bank of America reports that some divisions did experience an increase in profits. The Consumer and Business Banking divisions reported a 15 percent increase in profit and the Global Banking division reported a 7 percent increase in profits. They were not enough, however, to eclipse the weak performance in other divisions.
Mortgage- related concerns are still the chief reason for poor overall financial performance. Bank of America has already announced a deal with Fannie Mae to settle disputes on bad mortgage debt- a settlement reaching into the billions of dollars. Fines relating to poor handling of bad mortgages have also taken a toll financially and they contributed significantly to the weak fourth quarter performance.
The dust has not completely settled on the mortgage issue, but Bank of America management is convinced that the worst of the mess is behind them. The second half of 2012 was better than the first half and top management believes the financial situation will continue to improve in 2013.
Bank of America common shares are down about 4 percent following the news, in mid- day trading.
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