Bank of America Corp, the largest US bank by assets, reported weaker-than-expected revenue and a second straight quarterly loss of $1.2 billion after its limping mortgage business triggered writedowns and legal settlements.

Bank of America's Merrill Lynch businesses - including retail brokerage and investment banking - were profitable but did not make enough money to overcome the bank's massive losses from mortgages.

As the financial crisis was ramping up, then chief executive Kenneth Lewis bought Countrywide Financial for $4.2 billion. Current CEO Brian Moynihan is still coping with the aftermath.

In the fourth quarter, Bank of America took a writedown of $2 billion to recognize the declining value of Countrywide. The bank also set aside $4.1 billion for legal costs linked to home loans it is buying back from investors, or is likely to buy back.

'Countrywide is still hurting them and it will continue to. It's like a tooth being pulled -- it's only going to feel good when it's done,' said Matt McCormick, portfolio manager at Bahl & Gaynor Investment Counsel Inc in Cincinnati, which does not own Bank of America shares.

It was not clear how Bank of America's results compared with analysts' average estimates, given the profusion of special items in the report.

Bank of America is the only major bank this week to post a fourth-quarter loss, and it missed on analysts' revenue estimates. The bank posted revenue of $22.7 billion, below an expected $24.9 billion and its third straight quarterly decline. Revenue shrank 11 percent from a year ago.

The company's home loan business has lost more than $12 billion in the last two years. Chief financial officer Charles Noski said on a conference call that the bank may have to set aside another $7 billion to $10 billion to cover legal settlements with mortgage investors.

CEO Moynihan, speaking on financial news network CNBC, said the U.S. housing market would continue to bump along the bottom, and the banking industry would be dealing with related problems for years to come.

The bank's shares closed down 2 per cent at $14.25 on the New York Stock Exchange, lagging the KBW Bank Index, which rose 1.6 per cent.

Bank of America is relatively cheap compared with other bank stocks. It trades at about 1.1 times tangible book value, below the bank industry's average multiple of 1.6, said Alan Villalon, analyst at Nuveen Asset Management in Minneapolis.

Nuveen Asset Management owns shares of bank stocks, including Bank of America.-Reuters