Bank of America yesterday said its profit dropped 63 per cent as costs mounted from faulty foreclosures and flawed home loans while Citigroup reported a profit increase that was less than analysts estimated. Bank of America's net income dropped in the fourth quarter to US$732 million from US$1.99 billion a year earlier. Adjusted for one-time items, profit was 29 US cents a share, beating analysts' estimate of 20 US cents. Chief executive Brian Moynihan has spent his first three years cleaning up after his predecessor's takeover of Countrywide Financial and Merrill Lynch, selling more than US$60 billion of assets in the process. The bank announced an US$11.7 billion deal to end disputes with Fannie Mae on bad home loans this month and joined an US$8.5 billion industry accord to compensate for abusive foreclosures. Last year "was about resolving as many issues as they could", said Marty Mosby, an analyst at Guggenheim Securities. "While they've had to absorb some losses, they were less than the worst case, and that signifies progress." Bank of America, ranked second by assets among US lenders, said revenue fell to US$18.7 billion from US$24.9 billion in the quarter. Consumer and business banking's profit grew 15 per cent to US$1.4 billion as credit costs and expenses eased. Profit at the global banking unit rose US$95 million to US$1.4 billion. The company has booked almost US$50 billion in costs since 2007 including refunds and litigation tied to defective mortgages and improper foreclosures. In September, Moynihan agreed to pay US$2.4 billion to investors who said management hid the extent of Merrill Lynch losses ahead of its 2009 acquisition. For the full year, profit more than doubled to US$4.19 billion as revenue dropped to US$83.3 billion from US$93.5 billion. "We enter 2013 strong and well-positioned for further growth," Moynihan said. Citigroup, the third-biggest US bank by assets, meanwhile reported a lower-than-expected profit increase as litigation costs rose. Net income climbed 25 per cent to US$1.2 billion in the fourth quarter from US$956 million a year earlier, the lender said. Earnings adjusted for one-time items including restructuring costs were 69 US cents a share, much less than the 96 US cents estimated by analysts. Chief executive Michael Corbat took over in October. Last month, he announced plans to eliminate about 11,000 jobs and pull back from some emerging markets, undoing part of the expansion strategy of his predecessor, Vikram Pandit. Litigation costs included US$305 million from a settlement between US banks and federal regulators, who were probing claims that lenders improperly seized homes. "New management won't mind sacrificing a little earnings in the fourth quarter to help make 2013 earnings goals easier to hit," Marty Mosby, an analyst with Guggenheim Securities said before earnings were released. "They really aren't going to be held accountable for what happens in the fourth quarter." Citigroup's stock has gained 16 per cent since Corbat was installed as chief executive in October to replace Pandit. The board concluded that Pandit had mismanaged the firm's operations, including his failure to get Federal Reserve approval to increase dividends or introduce share buy-backs, a person familiar with the matter said at the time.