Bank of America's quarterly profit vaults 70%
18 July 2013
Bank of America has reported a bigger-than-expected 70 per cent jump in quarterly profit, helped by aggressive cost-cutting, as the turnaround efforts launched by chief executive Brian Moynihan started delivering results.
Revenue was up 3.5 per cent with the US' second-largest bank lagging behind Citigroup's 11 per cent and JPMorgan Chase's 14 per cent. Bank of America, though cut operating expenses 6 per cent, even as expenses rose at JPMorgan and Citigroup.
Under the cost-cutting measures launched in 2011, the lender had planned annual savings of $8 billion, and by the fourth quarter of 2013 it hoped to cut costs by $1.5 billion per quarter.
The bank said it was on track to meet those goals and was ahead of schedule on cutting costs from bad mortgage assets. The bank's shares rose over 3 per cent in afternoon trading.
While most of the bank's businesses generated higher income, the revenue picture was mixed and even slid 1 per cent in consumer and small business banking; in consumer real estate services, revenue fell 16 per cent. Revenues were up in retail brokerage and asset management, investment banking and sales and trading.
Moynihan told investors last quarter, that with the bank getting its expenses and bad assets under control, management would work more on boosting revenue and improving operations.
Revenues were up at $22.73 billion from $21.97 billion a year earlier, while expenses were down to $16.02 billion from $17.05 billion with the staff shrinking, litigation costs plunging by more than half and the drag at the division handling troubled mortgages easing.
Provision for credit losses was up 32 per cent from a year earlier at $1.21 billion, with the figure 31 per cent below estimates, according to a research note by Richard Staite of Atlantic Equities LLP.
According to the bank, net credit losses were down 1 per cent for the first time since the middle of 2006.
Income at the global banking unit, overseen by co-chief operating officer Thomas K Montag, was down 2 per cent at $1.29 billion on higher provisions fueled by commercial loan growth. Banking fees increased 36 per cent to $1.6 billion.
Profit in the global markets division excluding adjustments was up 57 per cent at $935 million with improved equity results overwhelming a drop in revenue from fixed income, currency and commodities sales and trading.