Sterne Agee Reiterates Neutral Rating On Bank Of America

According to Sterne Agee, Bank of America BAC earnings are a work in progress. Sterne Agee reported that legacy mortgage and elevated environmental costs continued to overwhelm favorable credit trends. “Although management is suggesting core earnings were closer to $0.30/share this quarter after adjusting for a host of special items, we put BAC's core earnings closer to $0.22/share—or a penny better than SA estimates and about $0.06/share below Street consensus. Although we made adjustments for DVA/CVA and merger costs (total $0.07 after tax charge), we elected not to give BAC credit for the various legacy mortgage costs and certain seasonal employee benefits costs (~$0.17/share after tax cost). BAC reported GAAP EPS of $0.17 in the quarter. Exclusive of the company's outsized reserve release this quarter, results were again light of conservative expectations. Revenue was light in most primary business lines and expenses remained excessively high. Positives included lower credit costs across most asset classes, stabilizing loan balances, and favorable revenue trends in investment/brokerage and fixed income capital markets.” Bank of America closed yesterday at $12.82.