Seeking Alpha

BofA's legacy servicing costs are dropping fast

  • Wow. Bank of America's (BAC +0.4%) Legacy Asset Servicing costs are expected to drop to a normalized run rate of $500M per quarter by the end of 2015, says KBW's Chris Mutascio after a meeting with the bank's CFO Bruce Thompson. This compares to $2.3B in Q2 of this year. Annually, this is $7.2B in savings over the next 2 years and beyond (mostly by way of layoffs as the beefed-up staff hired to deal with non-performing mortgages is cut).
  • For this year, management now expects LAS costs to fall to $2B in Q4. This is below the $2.1B guidance given during the Q2 earnings call (transcript).
  • Mutascio doesn't have an EPS estimate beyond 2014 ($1.38), but the LAS savings represent a $0.17-$0.25 benefit, he says. He currently rates the shares a Hold with $15 price target.
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