Further quarterly loss for biggest US bank

Bank of America was stuck in the red for the second consecutive trading quarter after massive writedowns in its struggling mortgage business, the biggest US bank disclosed yesterday.

BoA took a $2 billion (1.2bn) writedown on Countrywide Financial, the mortgage business bought by former chief executive Kenneth Lewis for $4.2bn during the gathering financial sector crisis.

Brian Moynihan, Lewis's successor, said BoA had also earmarked $4bn (2.5bn) for legal costs linked to home loans it is either buying, or likely to buy, back.

The group, which bought investment banking giant Merrill Lynch in the wake of Lehman Brothers' collapse in 2008, posted a fourth-quarter loss of $1.57bn (982m). That compared with a loss of $5.2bn a year earlier.

Matt McCormick, portfolio manager at Bahl & Gaynor Investment Counsel, said: "Countrywide is still hurting them and it will continue to. It's like a tooth being pulled. It's only going to feel good when it's done."

BoA's global banking and markets unit, combined with its wealth and investment management arm, which includes Merrill Lynch, made a profit of $1.06bn in the fourth quarter. BoA's bad debts fell 8 per cent from a year earlier to $32.6bn. In Q3 the bank reported a $10bn writedown of its cards business due to new curbs on fees.

BoA is the only major American bank to post a Q4 loss, following recent results from Citigroup, Goldman Sachs and JP Morgan Chase. BoA also disclosed that revenues fell 11 per cent to $22.7bn,

BoA's mortgages arm has lost more than $12bn in the past two years. Moynihan, speaking on US television, said he believed that the American housing market would continue to bump along the bottom, and the industry would be dealing with related problems for years to come.

This is in line with what mortgage market analysts have been saying stateside, with the worst fear that a fallback in the fragile US home loans market could trigger a double-dip recession.

However, Moynihan said he remained optimistic about the US economy in 2011, with all BoA's measures of consumer and business spending showing positive trends.

He also said the group planned to raise its dividend in the second half of this year if it passed the Federal Reserve's second stress test.

The bank slashed its quarterly dividend to 1 cent per share at the height of the financial crisis after receiving $4bn in government aid.