Bank of America beats analyst estimates as trading rebounds

Behind the Numbers

The adjusted profit excludes the $4.8 billion negative valuation adjustments in the first quarter and a charge of $943 million a year earlier, and is based on a 37% tax rate provided by the lender. With one-time items removed, earnings per share may have been closer to 17 cents a share, Paul Miller, an analyst at FBR Capital Markets, said during an interview on Bloomberg Television with Erik Schatzker.

“So, still a good number, but nowhere near as good as that 31 cents, and that’s what people are going to start to focus on,” Miller said.

Moynihan, 52, had told investors to expect the second phase of his efficiency plan, dubbed Project New BAC, to be in place this month. The firm most recently was scrutinizing investment banking, trading and wealth management. The first part, which examined retail banking, targeted 30,000 job reductions.

New Structure

Bank of America reorganized its reporting lines this month, combining deposit, credit-card and small business units into a new consumer-and-business banking division led by co-Chief Operating Officer David Darnell, 59. He also oversees real estate and wealth-management units.

Operations run by Montag, 55, the former Goldman Sachs Group Inc. trading head promoted to co-chief operating officer in September, were split into global markets and banking units. The banking unit incorporates parts of a former stand-alone business that catered to larger corporations with more than $50 million in annual revenue.

The lender has surged 60% this year in New York trading through yesterday, the best in the Dow Jones Industrial Average, as capital improved and the firm passed the Federal Reserve’s stress test. Moynihan sold more than $50 billion in assets to boost capital and simplify the firm since taking over in 2010.

Divestments Ahead

Moynihan has said that he will focus on selling home loans to customers of the firm’s domestic retail bank and wealth- management division. At the same time, he’s seeking to divest wealth-management units outside the U.S., a person with direct knowledge of the process said this week. The businesses operate in Europe, Asia, the Middle East and Latin America.

JPMorgan Chase & Co. and Wells Fargo & Co., the No. 1 and No. 4 biggest banks by assets, reported first-quarter earnings last week that exceeded analysts’ estimates on a rise in mortgage fees. The firms may have benefited as Bank of America retreated from selling mortgages after its 2008 takeover of Countrywide Financial Corp. saddled it with more than $40 billion in costs.

The lender saw its share of originations drop to 5.6% in the fourth quarter from 10% in 2011’s third quarter and 24.7% in 2007, according to a February note from FBR Capital Markets.

Bloomberg News

 

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