For Bank of America, legal costs continue to pile up

More litigation could cost billions, on top of billions already spent

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CHARLOTTE, N.C. — Five years after the financial crisis, Bank of America Corp. is still feeling the effects in its pocketbook. And it's not over yet.

The Charlotte bank has struggled under the weight of legal settlements, attorneys' fees and forced mortgage buybacks more than any other bank in the five years since the meltdown.

Bank of America still faces a slate of lawsuits and legal claims that could add up to billions more in costs. Analysts have hesitated to project how much more they could actually add up to. But this much is clear: The bank's ongoing legal issues will take several more years to resolve.

Already, Bank of America has spent a total of $20.1 billion in the past five years on legal fees and litigation expenses, reports filed with the Federal Reserve show. The bank also has paid out or set aside another $35.7 billion to repurchase mortgages from investors who claim the bank misrepresented the quality of the loans, according to the bank's most recent quarterly earnings presentation.

Combined, that's a $55.8 billion price tag for legal entanglements since the crisis -- far more than at peers like JPMorgan Chase, Citigroup and Wells Fargo.

"Bank of America had been the real epicenter for all this," said Marty Mosby, a bank analyst with Guggenheim Securities. While he said the bank appears to be making progress on its current legal issues, investors still worry that more costs could pile up. "Is there a lingering surprise that is all of a sudden going to come back and hit you in the ninth inning?"

A Bank of America spokesman declined to comment for this story. But the bank's litigation status has been a frequent topic of conversation on earnings calls and investor conferences for many months. CEO Brian Moynihan regularly cites cleaning up the bank's legal woes as a top priority.

And he has made headway. Bank of America has settled three large-scale conflicts in just the past year.

In the first, the bank agreed to pay $2.43 billion to settle a shareholder lawsuit over its 2009 acquisition of Merrill Lynch. Soon after, Bank of America came to a $10 billion agreement with mortgage giant Fannie Mae over more than $1 trillion in loans sold to the government-sponsored entity that went bad. In May, the bank agreed to pay bond insurer MBIA about $1.7 billion to settle a dispute over who should take the loss on soured mortgage-backed securities.

It has also slowly come to agreements with other types of investors who bought loans from Bank of America or from Countrywide Financial Corp., the subprime lender the bank acquired in 2008. Amid the housing collapse, many of these loans went bad, and investors sought to force the bank to buy them back.

"I think we've made a lot of progress," Chief Financial Officer Bruce Thompson told investors at a conference this month.

Still, the possibility of future legal costs and losses has continued to weigh on the bank's stock price. Bank of America shares are down more than 50 percent from where they were just before the financial crisis.

In an unscientific poll this month at an investor conference in New York, participants were asked what would most influence them to buy Bank of America stock. The most-cited answer: getting more clarity on the bank's litigation picture.