Despite the banking industry boasting some companies with the deepest pockets in the U.S., it can still feel the heat from litigation costs. Bank of America has experienced just that as evident with its first-quarter earnings report revealed April 16.
The company reported a net loss of $276 million during Q1. CNN notes that that is a 10-cent per share loss compared to Q1 of the year prior.
As the number two U.S. bank, Bank of America recorded billions of dollars in legal expenses. $6 billion in litigation costs was mostly derived from a legal dispute with the Federal Housing Finance Agency. Bank of America has been under fire in the courtroom since the financial crisis of 2008 over failed mortgage-backed securities that got many a financial institution in trouble. (The settlement with the Federal Housing Finance Agency itself came to a cool $9.5 billion, and was drawn up to end investigation into the mortgage-backed security scandal.) The Federal Housing Finance Agency sued 18 firms for their roles in the 2008 crisis, and Bank of America has been one of the highest profile institutions as it has had to face other organizations, and settle at high costs to its shareholders over the last several years.
But the legal expenses from Bank of America’s wrongdoings all those years ago are clearly still coming to bite it, and shareholders are indeed feeling the burn. The results cost shareholders $514 million in the first months of this year, compared to a profit of $1.11 billion during the same quarter of 2013.
CEO Brian Moynihan said in the company’s official statement: “The cost of resolving more of our mortgage issues hurt our earnings this quarter.” He emphasized that the losses were a result of a massive settling with many of the bank’s legal disputes and investigations, but that a return to shareholders is in store. Whether or not its financial losses as a result of legal issues were relegated to Q1, and Q1 only this year, will be closely scrutinized by investors.