BofA profit rebounds to $4.51B as revenue beats estimates

BANK OF AMERICA posted profit of $4.51 billion in the third quarter as litigation expenses declined and revenue beat expectations.
BANK OF AMERICA posted profit of $4.51 billion in the third quarter as litigation expenses declined and revenue beat expectations.

NEW YORK – Bank of America Corp., the second-biggest U.S. lender, posted third-quarter profit of $4.51 billion as litigation expenses tumbled and revenue exceeded some analysts’ estimates.

Net income was 37 cents a share, compared with a loss of $232 million, or 4 cents a share, a year earlier, when the Charlotte, N.C.-based bank had $6 billion in legal costs, the firm said Wednesday in a statement. The average estimate of 22 analysts surveyed by Bloomberg was for adjusted earnings of 33 cents a share.

Chairman and CEO Brian T. Moynihan, 56, has said he would trim expenses as low interest rates and volatile markets stymie revenue growth. He’s been helped by waning legal expenses tied to his predecessor’s acquisitions of Countrywide Financial Corp. and Merrill Lynch & Co., which have contributed to more than $70 billion in costs since the financial crisis. Revenue in the quarter fell 2.4 percent to $20.9 billion. That exceeded analysts’ estimates, including the $20.2 billion prediction of Keith Horowitz at Citigroup Inc.

“They’ve done a good job of keeping expenses under control,” Joseph Morford, an RBC Capital Markets analyst, said in an interview before results were released. Regarding trading, “things didn’t necessarily finish strong for anyone in September,” he said.

- Advertisement -

Costs drop

Expenses fell 31 percent to $13.8 billion, mostly because of the litigation costs a year earlier, beating Horowitz’s $13.9 billion estimate. Even excluding legal charges, expenses declined 4 percent as the company had fewer delinquent mortgage borrowers.

Bank of America climbed 1.8 percent to $15.80 in early trading at 7:29 a.m. in New York.

Global markets, the bank’s trading operations run by Chief Operating Officer Thomas Montag, posted profit that more than doubled to $1 billion from $371 million a year earlier because of lower litigation costs. Revenue slipped 5 percent to $3.76 billion, primarily because of a fixed-income drop. Bond-trading revenue declined 11 percent because of sluggishness in credit, while equities trading rose 12 percent on strength in derivatives, the bank said.

Moynihan cut about 200 trading and investment banking jobs at the end of the quarter after saying that trading revenue was headed for a drop of about 5 percent for the period.

Net income at the global-banking unit fell 16 percent to $1.28 billion on lower underwriting fees.

Foreign exchange

For last year’s third quarter, Bank of America initially reported a surprise $168 million profit after $5.3 billion in charges for regulatory settlements. Three weeks later, the firm said foreign-exchange trading probes wiped out an additional $400 million, leaving Moynihan with his fifth quarterly loss as CEO.

Last month, Moynihan survived a battle to remove him as chairman, fending off critics including the biggest U.S. pension funds. A resolution allowing Moynihan to retain the two top jobs passed with about 63 percent of the votes. Pension funds and proxy advisers had argued that more independent oversight was needed for Moynihan, who’s nearing his sixth year as CEO, as the bank’s stock trails peers.

Wednesday’s results are the first for Chief Financial Officer Paul Donofrio, who took over for Bruce Thompson in August. Donofrio was promoted in a broad shakeup that included making Terry Laughlin head of the bank’s wealth-management division as David Darnell retires and naming human resources head Andrea Smith the firm’s chief administrative officer. Bank of America is also looking for a replacement for General Counsel Gary Lynch, who was named vice chairman in July.

JPMorgan Chase & Co., the largest U.S. bank, posted third-quarter earnings Tuesday that missed analysts’ estimates as a slump in trading and mortgage banking drove revenue lower.

No posts to display