Bank of America Hit with $540 Million Judgment in FDIC Lawsuit

• A federal judge ordered Bank of America (BAC) to pay $540.3 million to the FDIC for underpaying deposit insurance fees from 2013 to 2014, rejecting the bank’s claims against a 2011 risk-reporting rule, though earlier claims were dismissed as untimely.
• BofA reported strong first-quarter results, with earnings of 90 cents per share, revenue of $27.51 billion, and an 11% profit increase to $7.4 billion, driven by $14.6 billion in net interest income and robust trading revenue.
• Despite a 16.5% year-to-date stock decline amid recession concerns, the bank’s $1.5 billion provision for loan losses was better than expected, highlighting financial resilience as it addresses the $540.3 million FDIC penalty.

Bank of America (BAC) faces a $540.3 million payment to the Federal Deposit Insurance Corporation (FDIC) following a federal judge’s ruling in a lawsuit alleging underpayment of deposit insurance fees, as decided by U.S. District Judge Loren AliKhan in Washington, D.C. The penalty, covering assessments from the second quarter of 2013 through 2014 plus interest, stems from a 2017 FDIC claim for $1.12 billion, accusing the Charlotte, North Carolina-based bank of skirting a 2011 rule on reporting risk exposure to counterparties. AliKhan’s 59-page decision dismissed Bank of America’s arguments that the rule lacked a reasonable basis or was arbitrarily enforced, affirming the FDIC’s authority to uphold banking stability post-2008 financial crisis. However, claims predating mid-2013 were deemed untimely by the judge. Bank of America, denying any intent to evade payments, has reserved funds for the ruling, according to spokesperson Bill Halldin.

Amid this legal setback, the bank, valued at $278.86 billion, reported a strong first quarter with earnings of 90 cents per share and revenue of $27.51 billion, surpassing expectations. Profit grew 11% to $7.4 billion, bolstered by net interest income of $14.6 billion, a 17% rise in equities trading revenue to $2.2 billion, and a 5% increase in fixed income revenue to $3.5 billion, though investment banking fees dipped 3% to $1.5 billion. Despite a 16.5% year-to-date stock decline tied to recession fears, a $1.5 billion provision for loan losses – better than anticipated – underscores resilience. This financial strength positions Bank of America to absorb the FDIC penalty while navigating economic uncertainties.

WallStreetPit does not provide investment advice. All rights reserved.