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Bank of America loses $9.1b

Associated Press / July 20, 2011

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NEW YORK - Things keep getting worse for Bank of America. Yesterday, the largest US bank posted a second-quarter loss of $9.1 billion, partly due to an $8.5 billion settlement with investors in June over claims the bank had sold poor-quality mortgage bonds.

The bank had already announced several other settlements this year; the total so far is $12.7 billion.

The settlements and losses on mortgage loans are causing worry about Bank of America’s strength. In a conference call, analysts grilled executives about whether the bank will need to raise more money to comply with new international rules on capital. If Bank of America has to boost its reserves, it might issue more stock. That would dilute the value of stock owned by current shareholders. The stock is down more than 35 percent this year.

Chief executive Brian Moynihan said that the bank’s finances were stronger between March and June than in the same period last year. “We don’t need to raise capital,’’ he said. Bank capital cushions unexpected losses.

Investors are not convinced, said Shannon Stem, an analyst at Edward Jones. “The margin of safety is clearly lower than at other banks, which leaves them more exposed to an economic slowdown or shock to the financial system,’’ he said.