NEW YORK —
On Thursday, the two banks disclosed that substantial legal costs undercut their fourth-quarter earnings. The expenses, the banks said, stemmed from huge settlements involving their mortgage businesses.
While the settlements lifted a dark cloud that hung over the banks, other legal problems will persist. Both banks continue to wrestle with federal authorities over claims they wrongfully evicted homeowners after using shoddy, flawed, or inaccurate documents in foreclosure proceedings. Bank of America and Citigroup also face a torrent of private lawsuits asserting that the banks duped investors into buying troubled mortgage securities.
‘‘The 2008 collapse was not the flu — it was a major debilitating disease,’’ said Lawrence Remmel, a partner at the law firm Pryor Cashman. ‘‘It takes time rebuilding your strength,’’ he said, and it is ‘‘unpredictable when some of the institutions will fully recover.’’
The mortgage overhang weighed on the banks’ quarterly earnings.
While Bank of America notched strong quarterly gains across several divisions, the mortgage settlements drained its earnings, which plunged 63 percent to $732 million, or 3 cents a share. All told, one-time expenses wiped out $5.9 billion, or 34 cents a share, from the bank’s quarterly earnings.
At Citigroup, a $1.3 billion legal bill dragged down profits. The bank reported a fourth-quarter profit of $1.2 billion, or 38 cents a share, significantly below analysts’ estimates.
The results come in contrast to competitors like Wells Fargo and JPMorgan. The two banks reported banner profits in recent days, with strong gains in their mortgage businesses. Those banks face their own legal costs, but the damage has been less severe.