Home loan arm weighs down Bank of America

BANK of America's Merrill Lynch brokerage arm provided a bright spot yesterday in an otherwise downbeat first-trading quarter for the bank when earnings slumped 37 per cent.

The US group posted first-quarter net income of $2 billion (about 1.2bn), down from $3.2bn in the same quarter a year ago. Earnings this time were partly hit by higher expenses from delayed home repossessions in its mortgage business.

The banking giant lost more than $2.39bn in its home loan business compared with a loss of $2.07bn a year earlier. Consumer complaints had surged in the fourth quarter of 2010 amid allegations that the bank was repossessing homes without having the right paperwork in place.

Analysts said the profits slide indicated why the Federal Reserve told BoA last month to rein in its plans to boost dividends, even as competitors were authorised to hike their payouts.

Ben Wallace, an analyst at Grimes & Co, said: "Bank of America is further behind. And the reason they're further behind is because of what's going on with the mortgage business."

The Merrill Lynch brokerage business reported higher revenue and client assets, and a net increase of nearly 200 financial advisers. BoA's loan book fell 8.5 per cent to $932.4bn in the first quarter from the fourth quarter of 2010.