Bank of America said Wednesday it made profit of $168 million in the third quarter of this year, down from $2.5 billion in profit a year ago, driven by a multibillion-dollar settlement with the U.S. Department of Justice weighing on its results.
The Charlotte-based bank’s recent $16.65 billion settlement with the Justice Department over soured mortgage bonds reduced earnings by $5.3 billion before taxes, or 43 cents per share after taxes.
When counting preferred dividends, Bank of America posted a loss of $70 million, or a penny per share, beating analysts’ consensus estimate of a 9-cent loss per share. Its revenue of $21.21 billion fell below the $21.36 billion expected by analysts.
The bank’s shares fell about 1 percent to $16.34 in pre-market trading.
The second-largest U.S. lender said four of its five businesses reported higher profits than a year ago, including the wealth and investment management group, which posted record earnings of $813 million. The mortgage unit reported a $5.2 billion loss, driven by the Justice Department settlement.
“We saw solid customer and client activity and improved profitability in most of our businesses relative to the year-ago quarter,” said Chief Executive Officer Brian Moynihan in a statement. “We remain focused on streamlining and simplifying our company and connecting customers and clients with the real economy, an approach that is paying dividends for them and for our shareholders.”
On a conference call with reporters, Chief Financial Officer Bruce Thompson said the bank has hit its “Project New BAC” goal of reducing quarterly expenses by $2 billion. The bank announced the cost-cutting initiative in 2011 and met its goal ahead of schedule.
In the third quarter, the bank had total non-interest expense of $19.7 billion, which was up from the second quarter and the third quarter of last year due to legal expenses. But when excluding litigation costs, expenses of $14.2 billion were down 2.7 percent from the second quarter, the bank said.
Bank of America employment fell in the third quarter versus a year ago. The bank had 229,538 full-time employees at the end of the period, down 7 percent from year ago.
The Justice Department accord was the biggest civil settlement between a single company and the government. In reaching that deal, Bank of America admitted that it, Countrywide Financial Corp. and Merrill Lynch took part in faulty mortgage-backed securities practices. Bank of America acquired Countrywide in 2008. It bought Merrill Lynch in 2009.
Bank of America becomes the latest big U.S. bank to report third-quarter earnings. Wells Fargo, JPMorgan Chase & Co. and Citigroup kicked off bank-earnings season Tuesday when they reported their third-quarter results.
San Francisco-based Wells, the fourth-largest U.S. bank by assets, posted $5.7 billion in profit in the quarter, up 3 percent from a year ago.
JPMorgan, the largest U.S. bank by assets, posted net income of $5.6 billion after reporting a loss of $380 million the same period last year. Citigroup, the third-largest U.S. lender, posted profit of $3.4 billion, up from $3.2 billion a year earlier. Both banks are based in New York.
Bank of America is the second-largest U.S. bank by assets. It employs roughly 15,000 employees in the Charlotte metropolitan area across various business lines.