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DEPARTMENT
ORIGINATION ORIGINATION
THE LATEST
Bank of America,
Morgan Stanley
Report Strong 2015
Earnings
AFTER SIGNIFICANT LEGAL
BURDENS IN 2014, BOTH BANKS
POSTED INCREASED EARNINGS
IN 2015.
NORTH CAROLINA // With
multibillion dollar mortgage-
backed securities settlements
mostly in the rear view mir
-
ror, Charlotte-North Carolina-
based Bank of America and
New York-based Morgan Stanley
both posted solid results in their
respective Q 4 and full year 2015
earnings statements released.
Without the legal expenses and
related charges that plagued them
in 2014, Bank of America reported
a net income of $15.9 billion for
the full year of 2015—more than
triple the bank's reported net
income of $4.8 billion for 2014, a
year in which the bank entered
into a $16.65 billion settlement
with the Justice Department and
several states over the sales of
faulty MBS. In fact, Bank of
America's earnings for 2015 were
the highest for the bank since the
pre-crisis year of 2006, when it
reported a record net income of
$21.1 billion.
Bank of America's Q 4 net
income was reported at $3.3 bil
-
lion, down from $4.5 billion the
previous quarter but up from $3.1
billion year-over-year.
"The 2015 results were our
highest earnings in nearly a
decade, reflecting the work we've
done to develop a straightforward
operating model focused on re
-
sponsible growth and doing more
business with each customer and
client," Bank of America CEO
Brian Moynihan said. "We saw
solid customer activity in loan
growth, deposits, and wealth
management asset flows, and we
returned more capital ($1.3 billion)
to our shareholders. As we build
on this progress, we will continue
to invest in the future and man
-
age expenses."
Likewise, with legal cost bur-
dens removed, Morgan Stanley's
reported net income for the full
year of 2015 was $6.1 billion,
up from $3.5 billion in 2014. In
February 2015, Morgan Stanley
entered into a settlement with
the Justice Department for $2.6
billion to resolve claims that the
investment firm packaged and
sold toxic MBS in the run-up to
the crisis. With litigation costs of
$3.1 billion reported for 2014 as a
result of the settlement, the firm's
earnings took a significant hit.
The year 2015 started out strong
for Morgan Stanley, with net
incomes of $2.4 billion, $1.8 billion,
and $1.7 billion for the first three
quarters, respectively. The firm's
net income for Q 4 2015 was $908
million on net revenues of $7.7
billion.
"A strong overall performance
in the first half of the year was
impacted by difficult market
conditions in the second half that
dampened trading activity," said
James P. Gorman, Chairman and
CEO of Morgan Stanley. "In the
fourth quarter we took action to
meaningfully restructure our fixed
income business on a capital and
expense basis. We enter 2016 with
a continued focus on managing ex
-
penses across the firm and driving
up returns for our shareholders."
While Bank of America's
mortgage production was up by 13
percent in Q 4, the bank's Legacy
Assets and Servicing (LAS)
Division—which works with
customers who are delinquent on
their mortgage payments—saw
some major cuts in 2015 due to
the reduction in distressed mort
-
gage loan volume. The number of
employees in the LAS Division
declined by 35 percent in 2015
down to about 11,200, while the
number of 60-plus day delinquent
loans serviced declined by 46
percent down to about 103,000.
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