Shares of Bank of America closed down sharply Wednesday after the bank reported a third quarter loss of 1 cent a share as a nearly $17 billion settlement with the Department of Justice sapped earnings.
But the nation’s second-largest bank still managed to post a small profit of $168 million before paying dividends to preferred shareholders. That’s down from the $2.5 billion in earnings, or 20 cents a share, a year earlier. The financial results from the Charlotte, N.C.-based bank beat Wall Street expectations because financial analysts had expected a loss of 9 cents a share, according to a survey by FactSet.
Bank of America shares closed down 4.6% at $15.76 as financial stocks tumbled in Wall Street’s steep sell-off Wednesday. In August, the bank agreed to pay $16.65 billion in a record settlement with the Justice Department, some federal agencies and six states for its role in selling bad mortgage bonds ahead of the financial crisis.
Bank of America said it took a pretax charge of $5.3 billion in the third quarter related to the settlement, the largest ever between the federal government and a single company. That reduced its earnings per share by 43 cents, in part because a portion of the charge was not tax deductible, bank Chief Financial Officer Bruce Thompson said during a conference call with financial analysts to discuss the results. Total revenue was $21.2 billion in the quarter compared with $21.5 billion a year earlier. That was a hair under analysts’ consensus forecast of $21.3 billion.