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Bank of America

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's fourth quarter earnings were dominated by costs from mortgage disputes, as the sheer weight of the problem made it difficult to assess the strength of the bank's ongoing businesses.

Bank of America reported a fourth-quarter net loss of $1.2 billion, or 16 cents a share, compared with a year-earlier loss of $194 million, or 60 cents a share.

Analysts had been expecting a $3 billion charge due to a settlement with government sponsored entities (GSEs)

Fannie Mae



Freddie Mac


over mortgage "putbacks," and a $2 billion "goodwill impairment charge" related to Bank of America's mortgage business, both of which were previously announced by the bank.

However, some may have been caught off guard by a $2 billion, or 12%, rise in non-interest expenses versus the third quarter. That included a $1 billion rise in litigation costs versus the previous quarter. Bank of America also spent $630 million more than the past quarter on personnel issues, including hiring and severance expenses, as well as professional fees.

While some of this was growth-related, much of the expenses went to cleaning up the mortgage-related mess, and bank executives said these expenses are likely to "remain evelvated" in 2011.

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Analysts and investors are eager to determine the likely exposure of Bank of America to disputes over "private label" mortgage securities, including litigation with monoline insurers such as


(MBI) - Get MBIA Inc. Report




Assured Guaranty

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Bank of America CFO Charles Noski said losses from those exposures could be as high as $7 billion to $10 billion before taxes, and another bank executive later on during the post-earnings conference call with analysts said they were "probably more than zero." Bank executives confirmed the losses are tax-deductible and stressed they may take years to determine.

Bank of America's main businesses appeared roughly in line with that of rivals, marked by improvement in investment management and consumer credit-oriented areas, as well as investment banking, but weakness in trading, particularly for fixed income.

Bank of America's fixed income currency and commodity (FICC) revenues of $1.8 billion were down 49% from the third quarter, "with lower results in credit, rates and commodities products," Noski said. He attributed the weakness partly to "seasonal" issues--the fourth quarter is traditionally the weakest--though he said a difficult market was also a major factor.

Rivals such as

Goldman Sachs

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Morgan Stanley

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, and


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, have posted similarly weak results in FICC, blaming the European debt crisis and a sharp rise in interest rates in mid-December.

JPMorgan Chase

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appears to have navigated the environment relatively well, however.

Bank of America executives reiterated their belief that they can raise the dividend before the end of 2011, though they stressed they would need the approval of regulators for such a move.


Written by Dan Freed in New York


Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.