NEW YORK (TheStreet) -- Legal costs are weighing on Bank of America's (BAC) earnings and its stock. And the results are frustrating investors on StockTwits.com. Several argue that shareholders should be able to put lawsuits related to the financial crisis behind them and focus on the bank's future performance.
$BAC so company execution is great. Only fear is future litigation $$$. People shocked at the billions in lawsuit $$ ?! No logic-- Afortyyearold (@Afortyyearold) Apr. 16 at 08:25 AM
Bank of America reported a $6 billion litigation expense along with its first quarter earnings Wednesday morning. The legal expenses caused an unexpected earnings per share loss. Shares opened down more than 1%. But sentiment on the stock is 76% bullish, according to StockTwits' analytics.
The bank said legal expenses related to settlements with the Federal Housing Finance Agency, Financial Guaranty Insurance Company and the Bank of New York Mellon, as well as reserves for future settlements, cost a total $6 billion, or 40 cents per share after tax. The cost took down Bank of America's quarterly EPS to a 5 cent loss.
"The cost of resolving more of our mortgage issues hurt our earnings this quarter," said CEO Brian Moynihan. "But the earnings power of our business and customer strategy generated solid results and we continued to return excess capital to our shareholders."
If not for the impact of litigation expenses related to bad mortgages, which came to a head during the financial crisis, Bank of America would have reported a 35 cent profit. Cashtaggers said that the bank's legal problems were well-telegraphed and that investors shouldn't have responded to the headline litigation figure by selling.
$BAC Why do the TV analysts act surprised at BAC legal costs? Have they not been reporting each and every settlement?!?-- Keith (@tradinwarrior) Apr. 16 at 07:46 AM
$BAC Behind the litigation expense is a well oiled machine. It's up to the economy now. Litigation about done. Moynihan doing it right.-- DeltaTrade (@DeltaTrade) Apr. 16 at 07:49 AM
The company reiterated that it would increase its stock dividend 5 cents per share in the second quarter and planned to repurchase $4 billion in common stock. Bank of America's capital plans were approved earlier this month after it passed government stress tests intended to insure that the bank has enough reserves to weather another financial crisis.
At the time of publication the author held no positions in any of the stocks mentioned.
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