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Bofa Reports Worst Ever Loss, Margins Shrink

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Bank of America Corp (BAC.N) reported a record quarterly loss -- $8.8 billion (5.4 billion pounds) -- as low interest rates squeezed lending margins at the largest U.S. bank.

The loss was widely expected after the bank said in June it settled with mortgage bond investors for $8.5 billion and was taking more than $14 billion of other home loan-related charges in the quarter.

But the bank's results, including its shrinking interest income, underscore the difficulties Chief Executive Brian Moynihan faces even if the bank moves past its mortgage problems. The bank's shares were down 2.8 percent, or 28 cents, at $9.44 in midday trading.

Still I'm sure things can only get better.... It's the recovery after all.

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Another horrendous quarter for Bank of America. While the company reported an adjusted EPS of $0.33 which shockingly came at the "at the high end of the prior guidance on June 29, 2011 when the company said net income excluding mortgage items and other selected items would be between $0.28 and $0.33 per share" the truth is that of the $5.6 billion in adjusted pretax net income, $3.3 billion was the result of credit loss releases. In other words 59% of the firm's "adjusted EPS" came from an accounting treatment and the CFO's interpretation of improving credit trends. As for the balance: another $1.5 billion came from a write-down in Mortgage Servicing Rights or another accounting gimmick. So take away the reserve release and MSRs, and one gets an EPS number that is 86% lower than the disclosed or about $0.05. The problem is that on an andjusted basis, the EPS was ($0.90) or a loss of $12.6 billion pre tax, driven by the previously disclosed settlements and a surge in provisions for Rep and Warranty settlements to $14 billion. Keep in mind this number will be far, far higher when all the Countrywide litigation is said and done. After all, the firm itself said that the "Estimated range of possible loss related to non-GSE representations and warranties exposure could be up to $5B over existing accruals at June 30, 2011. This estimate does not include reasonably possible litigation losses."

Still it can't get worse....

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  • 429 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?

      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%

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