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Bank of America: Cost-Cutting Loser (Update 1)

Tickers in this article: BAC C I:BKX PNC

Updated with Capital One's disappointing fourth-quarter results, and harsh reaction by investors in aftermarket trading.

NEW YORK ( TheStreet) -- Bank of America (GS) was the loser among the largest U.S. banks on Thursday, with shares sliding over 4% to close at $11.27.

As earnings reports continued to roll in, the KBW Bank Index (I:BKX) rose slightly to close at 53.62, although only six names showed declines, including Citigroup (C) , which was down 3% to close at $41.24.

Bank of America

Bank of America reported a fourth-quarter profit of $700 million or $.03 a share, beating the consensus EPS estimate among analysts polled by Thomson Reuters by a penny, after the company pre-announced a large mortgage putback settlement with Fannie Mae (FNMA) and a major contribution to the $8.5 billion foreclosure settlement between federal regulators and the nation's largest loan servicers.

Earnings for all of 2012 totaled $4.2 billion, or 25 cents a share, increasing from $1.4 billion, or a penny a share, in 2011.

Bank of America CEO Brian Moynihan said during the company's earnings conference call that the company had achieved "strong results" in strengthening its balance sheet, as the company built a $19 billion reserve for mortgage putbacks and increased its estimated Basel III Tier 1 common equity ratio to 9.25% as of Dec. 31, which is significantly above the 8.5% that will be required in January 2019, when the Federal Reserve's enhanced capital requirements for systemically important financial institutions are fully phased in.

When discussing the company's efforts to lower its expenses, Moynihan said "We have reduced our employee count in each quarter in the last five and we have done that while we continue to invest in our targeted growth areas," and that "we reduced our delinquent mortgage count, which allowed us to reduce our legacy asset servicing expenses," according to a transcript provided by Thomson Reuters.

UBS analyst Brennan Hawken said in a note following the earnings announcement that "excluding the foreclosure settlement, litigation, and GSE compensatory fees, legacy asset servicing (LAS) costs seem to be $2.8 billion, a 7% decline sequentially (3Q was $3.0 billion). Certainly a step in the right direction, but may be a bit light vs expectations."

When discussing Project New BAC -- Bank of America's "branded" cost-cutting program -- COF Bruce said during the conference call that excluding LAS costs, expense savings "on a quarterly basis were at $900 million a quarter as we leave 2012. We expect that our New BAC cost savings when we get to the fourth quarter of '13 will be at $1.5 billion per quarter."

When asked for clarification on the company's plan to reduce LAS expenses from $3.1 billion by $1 billion by the fourth quarter of 2013, Thompson said "you should generally expect it to come out throughout the year. It is not something you're going to have to wait for the fourth quarter to see."