Bank of America Corp (NYSE:BAC) is working to improve profits by reducing its number of problem mortgages and cutting other costs, Chief Executive Brian Moynihan told shareholders on Wednesday.
Moynihan, speaking at the company's annual meeting in downtown Charlotte, said the mortgage business of the largest U.S. bank by assets is "still struggling mightily" as it slowly crawls out from under the billions in soured home loans.
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"There's still a lot of work ahead to get through this," Moynihan told shareholders.
At the meeting, shareholders elect all 13 director nominees onto the board of directors. No shareholder proposal gained enough support to pass, including one by the New York City Comptroller seeking a review of BofA's foreclosure practices.
Moynihan said the bank is working through the mortgage issues, but cautioned that the woes will not vanish overnight. The two primary risks to the mortgage business are regulatory demands and the potential cost of principal writedowns, he said.
Moynihan, who replaced Kenneth Lewis as CEO in January 2010, initially produced a string of profits for the bank. But bad mortgages have held Bank of America back from the level of profitability that some rivals have been reporting in recent quarters.
Bank of America's losses in the second half of 2010 came as a surprise to some investors. While significant non-cash charges weighed on the bank's bottom line, its mortgage business also hampered core results.
Although Bank of America reported a first-quarter profit of $2 billion, earnings missed analyst expectations and were below the bank's year-earlier profit of $3.2 billion.
As BofA works to combat legacy loan problems, finding new business has been challenging as well. Its revenue and loan portfolio have continued to shrink in recent quarters as the U.S. economic recovery has slowed.
Investors are spooked the bank could be on the hook for billions more in soured mortgages held by outside investors, and that its foreclosure problems show no signs of abating.
Bank of America's home loans business lost $2.39 billion during the first quarter alone.
BofA was also one of a few banks whose dividend increase proposal was rejected by the Federal Reserve this year, following a second round of stress testing.
At the meeting on Wednesday, Moynihan reiterated his assertion that BofA will pay a dividend as soon as it receives regulatory approval and that share repurchases are a "high priority."
General Counsel Edward O'Keefe also said that the bank paid $1.4 billion worth of legal fees last year.
Moynihan said Bank of America must judge how a mortgage repurchase dispute will "damage you on the other side" when considering a settlement. Moynihan's comment was softer than the tone of his remarks last year, when he said the bank will engage in "hand-to-hand combat" in repurchase battles.
BofA shares were up 0.6 percent at $12.37 in Wednesday afternoon trading.
(Reporting by Joe Rauch; Writing by Lauren Tara LaCapra; Editing by Gerald E. McCormick, Matthew Lewis and Tim Dobbyn)