Bank of America profits plummet
A Bank of America customer uses an ATM at a branch in Hollywood on October 19, 2010. Two top US banks are moving on the offensive as they struggle to put the foreclosures quagmire behind them, but the scandal continues to menace the financial sector. Bank of America, the country's largest bank by assets, said it was lifting freezes on more than 100,000 foreclosure cases in 23 states, insisting it had not found any flaws in their processing. Bank of America, which had announced a nationwide moratorium on foreclosures to review its paperwork on October 8, nevertheless said the freeze will stay in place for now in the remaining 27 states.
REPORT FROM ALISA ROTH
STEVE CHIOTAKIS: Bank of America, the nation's largest bank by assets, today posted a profit for the first time in nearly a year. But company earnings are way down.
From New York, Marketplace's Alisa Roth reports the bank is still struggling from the effects of bad mortgages.
ALISA ROTH: Bank of America's earnings fell 36 percent in the first quarter. That's compared to the same stretch last year. Among other problems, the bank is still dealing with its acquisitions of Merrill Lynch and Countrywide, the doomed mortgage lender.
But the bank is shoring up its reserves. And trying to convince shareholders -- and everybody else --that it's on the road to recovery.
Last month, when B of A tried to raise its dividend, the Feds said no. A move that many suggests means the Fed thinks B of A is still too weak.
Karen Shaw Petrou follows banks at Federal Financial Analytics. She says today's earnings won't make that impression worse.
KAREN SHAW PETROU: Because everybody expected earnings to be at best weak. Bank of America is a large bank in a big, deep hole.
She says B of A still has two big problems to contend with. One is those troubled acquisitions, which came with lousy balance sheets and toxic assets.
But as daunting as that may be the other challenge is harder: she says it needs a solid economic recovery.
In New York, I'm Alisa Roth, for Marketplace.
INTERVIEW WITH CHRIS LOW
JEREMY HOBSON: Now let's get to Bank of America. The largest bank in the country said this morning its earnings dropped 37 percent last quarter compared with the same quarter last year. The culprit: bad mortgages.
Chris Low is chief economist with FTN Financial. He's with us now live from New York as he is each Friday. Good morning.
CHRIS LOW: Good morning.
HOBSON: So Chris, why is Bank of America still having mortgage problems?
LOW: Well, Bank of America during the financial crisis was asked by the Fed and the Treasury to purchase Countrywide, rather than allowing Countrywide to go bankrupt. That was the big national mortgage lender. They did, and in doing that, they acquired a whole lot of really bad mortgage loans. Not only that, they acquired books that were pretty murky, and it's taken them this long -- years -- to get to the bottom of those losses.
HOBSON: And are those losses, these toxic assets, hurting the whole banking sector? Or is this Bank of America-specific that this point?
LOW: There's a handful of banks that are suffering from this, but of the big banks, this is pretty much unique to B of A.
HOBSON: And so, this that what B of A is going to be looking at going forward here? Is it going to be all about mortgages or are there other issues that they'll be looking at?
LOW: Unfortunately there are other issues, and look, the market was up on Monday because JPMorgan reported strong earnings -- down by the end of the day. And the reason is we're now starting to worry about Dodd-Frank. These are the new, big regulatory changes that are coming that's going to make it hard even for healthy banks to make money.
HOBSON: Chris Low, chief economist with FTN Financial, thanks so much.
LOW: You're welcome.