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Credit Card Applications » News » Other » New rules cost losses of upto $7.3 billion for bank of America

New rules cost losses of upto $7.3 billion for bank of America

November 09, 2010
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Bank of America, the biggest lender in the U.S. has reported losses of up to a tune of $7.3 billion due to the new consumer protection regulations as well as the credit cards. It is currently putting up a fight to buy back the faulty loans.

The loss in the third quarter (77cents a share and 26 cents last year) has increased from a loss of about $1 billion based on the statement made by Charlotte, a bank based in North Carolina. Based on the survey by Bloomberg, the average estimate, of around 26 analysts was at 14 cents.

Brian T. Moynihan, Chief Executive Officer was quoted as saying that they must have strict rules on the consumer fees, deal with mortgage losses, and do away with the foreclosure practices of the industries. He also added that the worst was over as the results had seen a boost with gains in trading stock and they have been able to tide through the credit losses. He stated that the need to sell stock in order to meet the international standards was no longer there.

CEO of Second Curve Capital LLC, Thomas Brown, commented on Brian's talk saying that he was optimistic. The results had supposedly improved on two fronts an improvement in the capital, as well as the credit quality, and hence it was a good third quarter.

The reaction in the stock market was that shares had declined 4.4% to $11.80 after the news report by Bloomberg. Based on the news reports the Pacific Investment Management Company, Federal Reserve Bank of New York, and BlackRock Inc had written to the Bank of America and forced the lending bank to repurchase (faulty mortgages) which had been packaged $47 billion bonds.

While Bank of America's revenue from the fixed-income trading saw a hike from $2.32 billion to $3.53 billion during the second quart, the trading units reportedly made money every day.

Delinquency rates had gone down and Bank of America's banking income (mortgage) was almost double at $1.76 billion since the last quarter. While the interest rates were locked on the home loans, the profit margins had widened as the bank charged higher fees from the borrowers. While the states probes focused on the faulty foreclosures affidavits were filed in order to review petitions.

In the U.S., Bank of America is ranked first with regard to the assets & deposits and comes in second amongst the lenders and credit cards. It has seen a boost in its investment banking operations with the acquisition of Merrill Lynch.

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