Financial Reform To Cost Bank of America $50 billion Over 10 Years (NYSE: BAC)

Bank of America Corp (NYSE: BAC) announced tepid earnings results on Friday and warned that the financial reform legislation could cost the bank as much as $4.3 billion annually in lost revenue and a one-time cost of $7 billion to $10 billion resulting in a cost of more than $50 billion over the next ten years.

CEO Brian Moynihan didn’t provide much detail in the company’s earnings announcement how the bank plans to make up for the lost revenue and added one-time costs. As a result, investors fled from Bank of America Corp (NYSE: BAC)’s stock, sending it down 9.16% for the day on Friday. The Charlotte, NC-based bank is scrambling to raise various fees on accounts for retail customers and to get existing customers to make use of more of the bank’s service, but hasn’t provided much in terms of detail.

Bank of America Corp (NYSE: BAC) was the first major bank to disclose what effect the financial reform legislation will have. Moynihan said it would take years for the company to offset the lost revenue because of the legislation.

Industry analysts were taken aback by the estimate of lost revenue,. NAB Research LLC Analyst Nancy Bush said that Bank of America “is laying it all out there and, boy, I will tell you that hurts.” Miller Tabak & Co. also commented on Bank of America Corp (NYSE: BAC)’s results, writing “BAC showed excellent expense controls, but loans again declined during the second quarter, and the non-credit trends were otherwise lackluster. Off this report, we’d expect most regional banks to report in line results next week.”

The impact of the financial reform legislation will be most visible in the bank’s consumer finance unit, which accounts for more than half of the company’s revenue and impacts more than 55 million customers. The legislation places new restrictions on transaction fees that bank’s can charge on debit card payments, which are expected to cost the bank about $2 billion in annual revenue. The company’s decision not to charge overdraft fees will likely cost the bank an additional $1 billion per year in revenue.

Bank of America Corp (NYSE: BAC) said that the $7 to $10 billion one-time cost stemmed from the drop in the value of its credit card business once the legislation is signed into law.