Sterne Agee lowered estimates for Bank of America's (BAC) 2012 earnings by 25%, as legal costs continue to mount for the banking giant amid increasing uncertainty in capital markets. Analysts at the brokerage firm said while the company's fourth-quarter results were "very poor as expected," management is lowering expenses and working to resolve legacy mortgage issues under the New BAC initiative. Earlier this week, Bank of America reported income of $2 billion, or 15 cents a share, for the fourth quarter, up from a loss of $1.2 billion. Early in 2011, the bank formed a Legacy Asset Servicing division to grapple with home loans in default and moved 13,000 employees to it during the year, bringing the unit's total staff to roughly 48,500 people. In December, the Charlotte, N.C.-based bank announced plans to possibly rent a home back to the borrower after foreclosure, as it works through the heap of soured mortgages on its books. Sterne Agee expects the bank will "have a tough time generating positive operating leverage" this year and recommends investors avoid the stock, "given the slowing global economy, weak profitability outlook, and regulatory uncertainty given the outsized off-balance-sheet liabilities and increasing legal liabilities." "It will likely be 2013 before we see a more meaningful decline in legal/environmental costs," analysts Todd Hagerman and Robert Greene said. "Legacy asset servicing was again elevated in the fourth quarter, to $3.5 billion, including $1.5 billion of litigation accruals, which will likely continue at elevated levels throughout the year." The analysts now expect Bank of America to earn 60 cents a share in 2012 and 80 cents a share for 2013, down from prior estimates of 80 cents and $1.05 a share. Sterne Agee maintained its stock price target of $6. BofA was trading lower than $5 early in January, but has bounced back somewhat since. Write to Jason Philyaw. Follow him on Twitter: @jrphilyaw.