Bank of America earns $2.5 billion in 3rd quarter
Bank of America earned $2.5 billion in the third quarter, as the nation's second-biggest bank saw better results in bread-and-butter businesses such as stock trading and higher commercial loan balances.
The profit worked out to 20 cents a share — topping analysts' estimates that Charlotte-based Bank of America would earn 18 cents a share — compared with a profit last year that amounted to less than a penny per share. Revenue was $21.7 billion, up $1.1 billion from a year earlier, the bank announced early Wednesday morning.
The bank is benefiting from the improving economy, CEO Brian Moynihan said in a statement. The bank is seeing smaller credit losses, as write-offs on credit cards were the smallest since 2006. And borrowers are confident enough that small-business lending commitments rose 31% from a year ago, the bank said.
"Our customers and clients continue to do more business with us," said Moynihan. "The economy and business climate will improve even more quickly as conditions normalize, and we are well positioned to benefit from that."
The quarter was a little bit better than expected, but marred by legal expenses, Raymond James analyst Anthony Polini said.
"It was a messy beat for BofA, driven by lower credit costs,'' he said. "The key highlights for the quarter were strong commercial loan growth and a stable net interest margin. Equity gains were higher than expected but were offset by legal expenses.''
The results showed Bank of America doing well enough to overcome an oddity of the recent financial crisis — a tax cut that cost the bank $1.1 billion.
The reason is that the bank had lost so much money in the bad years that it had billions of dollars of tax credits it planned to use to shelter future profits. A corporate tax cut in the United Kingdom reduced the value of its so-called deferred tax asset, forcing Bank of America to take a third-quarter charge that reduced earnings by 10 cents a share.
Expenses fell $1.1 billion to $17.5 billion during the quarter. The bank said it has shed almost 25,000 employees during the last year, slimming down to 247,943 staffers.
Profit jumped 32% to $1.8 billion in the bank's consumer and business banking segment, its largest unit. Its loss in consumer real estate services widened to $1 billion from $837 million a year ago on lower refinancing volume. BofA's wealth-management business saw profit jump 26% to $719 million.
Profit in its global banking business was little changed at $1.1 billion. The bank's global markets business, which includes many trading operations, lost $778 million, but that was largely because of the $1.1 billion charge related to British taxes. Excluding one-time factors and accounting adjustments, the global bank earned $531 million, down from $872 million last year.
The biggest factor in the operating-profit drop was a decline in fixed income, currency and commodities trading revenue, which dropped $501 million to $2 billion because of concerns about interest rates and political risk, the bank said. A $255 million boost in stock-trading revenue made up for part of the shortfall.