Bank of America, the country's second largest bank by assets and the megabank most damaged by the aftermath of the mortgage crisis, earned $3.44 billion in the fourth quarter with $21.5 billion of revenue, giving it 29 cents a share in earnings, beating analysts expectations of 27 cents.
These expectations-beating earnings came in the face of a slowing down mortgage market, where Bank of America is one the largest players, and persistently high legal costs for a bank saddled with the litigation baggage of the investment bank Merrill Lynch and the mortgage company Countrywide, both acquired in the midst of the financial crisis in 2008.
Bank of America has spent $50 billion on legal disputes stemming from its mortgage business and set aside another $2.3 billion in reserves to deal with further litigation from the packing and selling of mortgages to investors, including a possible future settlement with the Justice Department similar to its rival JPMorgan's $13 billion payout.
The bank only earned $732 million a year ago, largely thanks to a 10 billion settlement with the government mortgage company Fannie Mae.
"We are pleased to see the core businesses continue to perform well, serving our customers and clients," CEO Brian Moynihan said in a statement.
LIke its counterparts, Bank of America was hit by a slowing down housing market. First mortgages for homebuyers fell 46% from a year ago, down to $11.6 billion from $21.5 billion, even though it had originated $22.6 billion worth of new mortgages just in the last quarter. But its consumer real estate division's loss shrunk to $1 billion this quarter from $3.7 billion in the fourth quarter of last year.
But while its lending may not be growing quickly, the quality of Bank of America's existing loans continue to markedly improve. The bank's provision for loan losses was only $336 million compared to $2.2 billion a year ago.
"We enter this year with one of the strongest balance sheets in our company's history," chief financial officer Bruce Thompson said in a statement, "Capital and liquidity are at record levels, credit losses are at historic lows, our cost savings initiatives are on track and yielding significant savings, and our businesses are seeing good momentum."
Bank of America also reported significant belt-tightening and staff reductions, which have been felt across the banking industry. Its headcount by the end of 2013 was at 242,117, a 9% drop from the year before.