Bank of America advanced in New York trading as the second-largest U.S. lender said lower legal expenses and loan losses helped profit rebound.
Net income in the third quarter rose to $2.5 billion, or 20 cents a diluted share, from $340 million a year earlier, when per-share results were break-even, the Charlotte, North Carolina-based bank said today in a statement. The average estimate of 24 analysts surveyed by Bloomberg was 21 cents.
Chief Executive Officer Brian T. Moynihan, 54, has said the lions share of costs tied to disputed mortgages are behind his bank after booking more than $45 billion tied to his predecessors 2008 takeover of Countrywide Financial Corp. The bank will trim $8 billion in annual operating costs by the end of 2014 and $10 billion from troubled loans a year later, Moynihan has said.
Theyve done a fairly good job of convincing the market that those cost savings are going to occur, said Jonathan Finger, whose family-owned investment company, Finger Interests, owns 900,000 Bank of America shares. Their results have gotten cleaner, though a lot of folks still expect some charges going forward.
Bank of America shares rose 1.5 percent to $14.46 at 9:44 a.m. in New York.
Total expenses during the quarter slid 6.6% from a year earlier to $16.4 billion because of lower costs in the division servicing troubled loans, staff reductions and litigation costs that fell by 31% to $1.1 billion.
CAPITAL RATIOS
Capital levels improved, with the bank saying it expects to exceed new U.S. regulatory minimums -- known as the supplementary leverage ratio -- for the parent company and its two primary banking units.
Revenue rose 5.4% to $21.5 billion. Excluding certain accounting adjustments, revenue slid to $22.2 billion from $22.5 billion.
We saw good loan growth, improved credit quality and record deposit balances, Moynihan said in the statement.
Income at the global banking unit, overseen by co-Chief Operating Officer Thomas K. Montag, slipped 1.5% to $1.13 billion on higher provisions for credit losses.
Global markets, the banks trading operations, posted a 39% drop in profit to $531 million excluding adjustments tied to credit and tax rate changes. Revenue in the division fell 5% to $3.7 billion on lower results across fixed-income units.
FIXED INCOME
Revenue in the firms fixed-income, currency and commodities sales and trading division fell 20% to $2 billion because of lower market volumes arising from concerns around monetary policy as well as political uncertainty domestically and abroad, the lender said. David Sobotka became sole head of the unit last month after former co-head Gerhard Seebacher retired, according to a memo from Montag.
The lenders results compare with $2.78 billion in third- quarter fixed-income revenue at Citigroup Inc. and $3.44 billion at JPMorgan Chase & Co.
Bank of America said equities sales and trading revenue rose 36% to $970 million on increased market volumes.
Consumer and business banking, part of retail operations overseen by co-COO David Darnell, reported that profit jumped 32% to $1.8 billion as revenue, deposits, consumer credit- card spending and small-business loans increased, the bank said. The net loss from consumer real estate, which includes home lending, widened to $1 billion from $857 million as production fell.
Profit at the wealth-management division, which includes the Merrill Lynch brokerage, jumped 26% to $719 million, fueled by higher asset-management fees.
CHINA CONSTRUCTION
The bank told investors last month the quarters results would be helped by the sale of about 2 billion shares in China Construction Bank Corp., ending an eight-year investment in the Beijing-based lender.
Moynihans performance won praise from Warren Buffett, the chairman of Berkshire Hathaway Inc., who cited the decline in bad loans. Buffett invested $5 billion in the bank in 2011.
I dont think anybody expected charge-offs a few years ago to be as low as they are now, Buffett, 83, said today on CNBC. So Brians done a great job.
Moynihan, a lawyer who served as general counsel, may have to deal with another round of legal woes tied to mortgages. Bank of America was sued by the U.S. for allegedly hiding risk from investors in an $850 million securitization in 2008, according to a complaint filed in August. Regulators are also scrutinizing Merrill Lynch sales of collateralized debt obligations, the lender said.
JOB CUTS
Bank of America cut more than 9,200 jobs during the third quarter, or about 3.6% of the workforce, bringing full- time employees to 247,943, according to the banks report today. Chief Financial Officer Bruce Thompson cited reductions in home lending and branches during a conference call today and said that headcount will continue to drop.
Banks are cutting home-lending staff as higher interest rates discourage refinancing. Bank of America will eliminate 2,100 jobs and close 16 mortgage offices, two people with knowledge of the plans said last month, following reductions announced by bigger mortgage rivals Wells Fargo & Co. and JPMorgan.
SHARE PERFORMANCE
The stock gained 7.3% during the third quarter, the best showing among the four biggest commercial U.S. lenders, and gained 23% this year through yesterday, trailing the 24-company KBW Bank Index by less than one percentage point.
JPMorgan, the biggest U.S. lender by assets, posted a third-quarter loss of $380 million after taking a $7.2 billion charge to cover the cost of litigation and regulatory probes of the New York-based bank.
Wells Fargo, the biggest mortgage lender, said profit rose 13% to a record $5.58 billion as the San Francisco-based firm released reserves for credit losses. Citigroup profit, which rose to $3.23 billion from $468 million, missed some analysts estimates as bond trading and mortgage lending slumped at the New York-based bank, ranked third by assets.
