On Tuesday Bank of America reported a net loss of $7.65 billion, or -77 cents per share. This net loss included a non-cash goodwill impairment of $10.4 billion. When excluding this non-reoccurring charge, the company reported a net income of 3.1 billion or 27 cents per share. The impairment charge resulted from the Dobb-Frank Consumer Protection Act that limits the fees a bank can charge for debit and credit card use. The normalized earnings of 27 cents per share beat the street consensus of 16 cents per share.
For the quarter Bank of America strengthened its tier one capital ratios, increased asset management fees from the Merrill Lynch acquisition, and the investment bank remains number two in global investment banking fees. On the other hand, due to financial reform, Bank of America expects to see declines in the Global Card Services segment and in fees collected for overdrafts.
Bank of America’s share price was hit hard even after the positive earnings surprise because of developing news that the company may have to repurchase bad loans that were not serviced properly by Countrywide. The Federal Reserve Bank of New York and Pimco are two the major players who are putting pressure on Bank of America to repurchase the loans. The amounts to be repurchased in unknown right now, but investors fear it could be billions.