Bank of America Says Net Income Rebounds as Expenses Ease
Bank of America Corp., the second-largest U.S. lender, said third-quarter profit climbed as the firm curbed expenses and more borrowers paid on time.
Net income advanced 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 'lion's share' of mortgage costs are behind his bank after booking more than $45 billion tied to his predecessor's 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.
'They've 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 Ltd., 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 told investors last month the quarter's 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.
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.
Staff Cuts
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 Chase & Co.
Bank of America shares rose 7.3 percent during the third quarter, the best showing among the four biggest commercial U.S. lenders. The bank closed at $14.24 yesterday for a 23 percent gain this year, 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 percent to a record $5.58 billion as the San Francisco-based firm released reserves for credit losses. Citigroup Inc. 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 company, ranked third by assets.
To contact the reporter on this story: Hugh Son in New York at hson1@bloomberg.net
To contact the editors responsible for this story: Christine Harper at charper@bloomberg.net; David Scheer at dscheer@bloomberg.net
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