12:32 ET<\/span>
\n<\/span><\/p>\nBank of America Merrill Lynch has reported a 38% decline in profits for the first three months of 2011 compared with a year earlier.<\/p>\n
It made a profit of $2bn (\u00a31.23bn), but the bank’s residential mortgage unit lost $2.39bn, as debts were not repaid.<\/p>\n
High unemployment and falling property prices have seen many US households falling behind on their mortgages.<\/p>\n
Analysts were disappointed by the figures which came after unexpectedly good results from rival JP Morgan.<\/p>\n
“I think the reason seems to be Bank of America is struggling with the mortgage mess and cleaning up what is going on there,” said David Morrison a market strategist at GFT Global Markets.<\/p>\n
The first quarter result was, however, an improvement on the loss of $1.2bn dollars made in the final quarter of 2010. <\/p>\n
Mortgage problems<\/span><\/p>\nThe bank has not only faced the problem of debts not being paid, but has also incurred costs due to problems and delays with its attempts to foreclose homes.<\/p>\n
The bank said it had lost $874 million in “mortgage-related assessments and waivers”. <\/p>\n
Some $1bn of costs came from not being able to sell on mortgages which then fell in value.<\/p>\n
Bank of America, the US’s largest bank, does business with half of all the country’s households.<\/p>\n
JP Morgan, the second-largest US bank, had also said that it had suffered high losses on its mortgage related assets, including similar costs associated with delays.<\/p>\n
“Unfortunately, these losses will continue for a while,” said JP Morgan chief executive Jamie Dimon last week.<\/p>\n
Analysts say Bank of America is particularly exposed to the mortgage market since it’s take-over of Countrywide Financial in 2008.<\/p>\n
Markets were disappointed at the results with the bank’s shares falling 1%.<\/p>\n
The bank announced that Bruce Thompson, its chief risk officer, will also become chief financial officer in July. <\/p>\n
Chuck Noski, the current CFO, will become vice chairman of Bank of America.<\/p>\n
Mortgage losses were one of the main causes of the financial crisis in 2008 which saw Bank of America merge with investment bank Merrill Lynch.<\/p>\n
Heavy losses in the merged unit forced the bank to rely heavily on Federal funds through the Troubled Asset Relief Program.<\/p>\n<\/p><\/div>\n<\/p>\n
Original post:
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