Bank of America beats analyst estimates as trading rebounds

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April 19 (Bloomberg) -- Bank of America Corp., the second- largest U.S. lender, said first-quarter profit rose amid a rebound in trading and better credit quality. The shares jumped in early trading.

Profit excluding certain one-time items increased about 40% to $3.7 billion, or 31 cents a diluted share, from $2.6 billion, or 23 cents, a year earlier, based on data released in a statement today. That beat the average per-share estimate of 27 analysts surveyed by Bloomberg of 12 cents. Net income, which includes accounting charges, fell to $653 million, or 3 cents a share, from $2.05 billion, or 17 cents.

Chief Executive Officer Brian T. Moynihan has said he’s counting on trading units run by Thomas K. Montag to revive income and had warned he would cut costs more deeply if results didn’t improve. The business responded with its first profit in three quarters and positive trading revenue every day amid the best start for the Standard & Poor’s 500 Index in 14 years and a lull in Europe’s debt crisis.

“You had very favorable tailwinds in the fixed-income markets and so trading revenues are very strong for this universe right now,” Charles Peabody, an analyst at Portales Partners LLC in New York, said in a Bloomberg Radio interview. “There’s no question the earnings that are being reported are very good -- the question is the sustainability.”

Bank of America, based in Charlotte, North Carolina, climbed 3.7% to $9.25 at 8:32 a.m. in New York.

Trading Results

Global markets, the bank’s trading operations, posted a $798 million profit, compared to a $768 million loss in the fourth quarter and a $1.39 billion profit a year earlier. The division’s latest results include a $1.4 billion charge related to its debt, more than three times bigger than a similar accounting charge a year earlier.

Sales and trading revenue excluding accounting adjustments more than doubled to $5.2 billion in the first quarter from $2 billion in the fourth quarter, and advanced from $5 billion a year earlier, the bank said. The tally for the most recent three months was the third-highest since the takeover of Merrill Lynch in 2009, according to the company.

Fixed Income

Revenue from fixed income, currency and commodities excluding adjustments rose to $4.1 billion in the first quarter from $1.3 billion in the fourth quarter and $3.7 billion a year earlier, according to the statement.

“We saw improved profitability in all of our businesses this quarter compared to the fourth quarter of last year,” Moynihan said in the statement.

The $2.42 billion provision for credit losses was the smallest since the third quarter of 2007, according to the bank. The real estate unit’s loss narrowed to $1.15 billion from $2.4 billion a year earlier as the firm set aside less for mortgage repurchases.

The provision for loan repurchase demands dropped to $282 million from $1 billion, with revenue increasing to $2.7 billion from $2.1 billion a year earlier. The bank reclassified $1.85 billion of home equity loans as nonperformers, responding to new regulatory guidance on how to treat junior liens when first mortgages are overdue. The bank said the sum was already covered by reserves.

Companywide revenue narrowed 17% to $22.3 billion from $26.9 billion, the bank said. Total loans and leases slipped to $913.7 billion from $932.9 billion in the fourth quarter.

Fair value and debt valuation adjustments totaled about $4.8 billion before taxes, according to the bank. Comparisons with last year were also skewed by one-time pretax gains of $1.2 billion on buying back debt and trust preferred securities and $800 million each from equity investment income and sales of debt securities. Pretax litigation expenses subtracted $800 million and one-time retirement-related costs were about $900 million.

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