Bank Of America Reports Q1 Loss On Massive Legal Charge, Ongoing Operations Disappoint As NIM Tumbles

Tyler Durden's picture

Moments ago Bank of America reported its Q1 earnings, and as expected, they were quite a mess, with the bank posting an actual loss of $0.05 on expectations of a $0.27 beat, which however - in the spirit of JPM - was the result of a $6 billion pretax charge related to various litigation items, which amounted to $0.40 per share. So Bank of America would like you, dear bank analysts, to do what you do to JPM every quarter with its recurring "non-recurring" litigation item, and please add it back.

These were the add backs:

  • 1Q14 net loss of $0.05 per diluted share included pre-tax litigation expense of $6.0B, or $0.40 per share after-tax
    • $3.6B pre-tax expense associated with previously announced FHFA settlement
    • $2.4B pre-tax expense for additional reserves primarily for previously disclosed legacy mortgage-related matters

The only good news at the P&L level was that the Q1 reserve release was "only" $379 million, down from $804 million in fake earnings a quarter ago.

But what is worse is that Bank of America reported Net Interest Income of $10.1 billion, far below the expected $11 billion, and an amount that had nothing to do with legal fees, "one-time" charges and reserve releases.

Why was this number so weak? Because not only does BofA's balance sheet continue to collapse, with its mortgage services portfolio crashing from $1.185 trillion to just $780 billion, but because BofA just reported the lowest NIM, or Net Interest Yield as it likes to call it, in history at 2.29%. So much for that NIM surge that everyone was expecting.

And speaking of BofA's balance sheet things turned decided sour in Q1 when the bank's provision for credit losses - an amount that flows directly through the P&L - soared from$0.3 billion to $1.0 billion, the highest since Q2 2013.

As the bank explained, "Provision for credit losses increased from 4Q13 due to slowing pace of credit quality improvement." Alternatively, one could call it what it is: an increasing pace of credit deterioration, hence the loss provision surge.

Going down the balance sheet, no surprise that like all the other major banks, BofA too was skwered when it comes to mortgages.

BofA's comments on this deterioration:

  • Total first-lien retail mortgage originations were $8.9B, down 24% from 4Q13... and down over 60% from Q1 2013.
  • Servicing income declined $205MM from 4Q13 due to the continued decline in the size of the servicing portfolio combined with less favorable MSR net hedge results

End result: "Total staffing declined 11% from 4Q13, due primarily to continued reductions in LAS, as well as actions taken in sales and fulfillment as refinance demand slowed"

Elsewhere, there was no joy in tradeville either, as like all the other banks, BofA also succumbed to the ongoing contraction in trading across the board:

BofA's commentary:

  • FICC revenue decreased $51MM, or 2%, vs. 1Q13, driven by weaker results in Rates and Currencies due to declines in market volumes and volatility; revenue increased $870MM vs. 4Q13 from seasonally stronger results
  • Equities revenue was flat compared to 1Q13; revenue increased 28% vs. 4Q13 on seasonally higher client activity

Bottom line, despite all the bluster and posturing one is about to hear on the conference call, here is how the bank sees its future

Full earnings report:

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TideFighter's picture

Bank in Florida with Billions of Foreclosures > 1200 days old = Bank of America

Dubaibanker's picture

And, we have a runnner.......this time from Lloyds...

Lloyds head of foreign exchange trading quits post citing personal reasons

Of course, this wont make it to the FT or Bloomberg or NYT, Yahoo Finance or WSJ etc because that would be blasphemy! Reuters is more neutral, IMO, and has reported.

Tabarnaque's picture

Strange, they normally fly off balconies.

disabledvet's picture

I think it's "trip and fall." Who actuall "jumps" to his death? That connotes you're somehow happy or energized by something.

You know like "I jumped at the opportunity and seized the day."
Not "I jumped to my death."

We're these people singing glorious patriot songs on their way down too?

NoDebt's picture

Logan's Run, but with bankers.  That's a show I'd watch.

Cursive's picture



"Provision for credit losses increased from 4Q13 due to slowing pace of credit quality improvement."

Aldous Huxley, George Orwell and Franz Kafka are drinking coffee and chuckling right now.

Bill of Rights's picture

US Postal Service Joins in Federal Ammo Purchases


Add the U.S. Postal Service to the list of federal agencies seeking to purchase what some Second Amendment activists say are alarmingly large quantities of ammunition.

Earlier this year, the USPS posted a notice on its website, under the heading "Assorted Small Arms Ammunition," that says: "The United States Postal Service intends to solicit proposals for assorted small arms ammunition. If your organization wishes to participate, you must pre-register. This message is only a notification of our intent to solicit proposals."

Dr. Engali's picture

They have to protect themselves from postal workers who go postal.

Occams_Chainsaw's picture

I thought they were broke and now they are out buying ammo?

daveO's picture

To protect management when they don't make payroll!

overmedicatedundersexed's picture

zombie mega banks, getting daily infusions at the discount window, and outright gifts ala Hank Paulson, yet looking like they are still 

alive and sound institutions..insane world and only you and I are sane.

Cattender's picture

AND BOA is Actually a part of the FED i Believe..

Seasmoke's picture

How are these bankrupt criminals still in business ????

And they are still fraudclosing even though they loaned no money, own no mortgage and hold no note, supposedly on behalf of so called investors....


Fight these motherfuckers every step if the way.



NoDebt's picture

If it wasn't for delinquent loans, they'd have almost no loans at all.

Son of Loki's picture

"If they want to keep their loans, they can keep their loans."

SmittyinLA's picture

When your income is all "fee revenue" you don't really care whether the loans are good or bad unless the revenue stream is threatened (it's not, there us a direct pipe to the US Treasury*) , in fact there's a greater opportunity for "gouge fees" with a fraudulent loans than a legitimate loan as the borrower's not paying the fees or taking risks with his money but the lender's money.

*only as long as dollars are accepted with a constant value*

**Ukraine motive

Basically FNM is leading America to nuclear war.


MFL8240's picture

No worries here. Janet will work hard today to funnel a few billion into their account to freshen things up!  One of the 4 whore houses that have been the catalyst to take America down in order for them to be saved.  Then again if it were truely a whore house rather than a courrpt bank, it would proabably be very profitable!!

daveO's picture

No, it'd be a whore house full of Aids infected Haitians.

venturen's picture

rather than report legal charges which are just made up by the about a body count of jailed and jumped?

ebworthen's picture

Guido's profits fall this quarter having to pay hush money to the local cops.

The shakedowns of the neighborhood families and businesses to continue apace.

It's good to be a Godfather in the New Rome.

Colonel Klink's picture

DIE Bankruptcy of America Muppet Looting!!!

That is all.