For The Love Of Money

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Bank of America expects loss after settlement

NEW YORK (Reuters) - Bank of America Corp (NYSE:BAC - News) said it expected to take more than $20 billion in charges after settling with mortgage bond investors, resulting in a second-quarter loss.

The $8.5 billion settlement removed a question mark that had been hovering over the bank since October, and its shares rallied.

The deal, combined with other settlement-related charges, was within the range that Bank of America had disclosed in a filing in May. The settlement still requires court approval.

Bank of America settled with a group of investors, including BlackRock Financial Management (NYSE:BLK - News), who alleged the bonds they bought from Countrywide Financial were packed with mortgages that should never have been sold. Bank of America bought Countrywide, once the largest U.S. mortgage lender, in 2008.

The settlement could pressure other big banks, including JPMorgan Chase & Co (NYSE:JPM - News) and Wells Fargo & Co (NYSE:WFC - News), to settle similar lawsuits with mortgage bond investors.

Bank of America said it expected to post a loss of 88 cents to 93 cents per share for the quarter.

Excluding special items, Bank of America said it expected to earn 28 cents to 33 cents a share. Analysts had been expecting 28 cents, according to Thomson Reuters I/B/E/S.

The bank said its charges would include the $8.5 billion settlement with bond investors and another $5.5 billion to cover expected payments to other mortgage bond investors.

The bank is also expecting to take $6.4 billion in other charges linked to mortgages.

The $8.5 billion settlement covers claims from 22 institutional investors, including BlackRock, Pacific Investment Management Co and Western Asset Management.

Shares of Bank of America rose 3.7 percent to $11.22 in trading before the market opened.

(Reporting by David Henry, additional reporting by Brenton Cordeiro in Bangalore, and Lauren Tara LaCapra and Dan Wilchins in New York; Editing by Lisa Von Ahn)

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