July 18 (Bloomberg) -- Bank of America Corp., shaking off some of the drag caused by faulty mortgages, swung to a second- quarter profit as real estate-unit losses narrowed and the company set aside less money for bad loans.
Net income was $2.46 billion, or 19 cents a share, compared with the year-earlier record loss of $8.83 billion, or 90 cents a share, the Charlotte, North Carolina-based company said today in a statement. Results beat the 15-cent average estimate of 25 analysts surveyed by Bloomberg.
The biggest U.S. banks have struggled to expand revenue amid a weak economy, putting pressure on Chief Executive Officer Brian T. Moynihan to control expenses. In March, he promised “demonstrable progress” every quarter, with more than 30,000 jobs targeted for elimination at retail and support divisions, and the CEO today announced $3 billion more of cuts at the investment bank, trading and wealth management units.
“We’re counting on expense efficiencies to be the primary driver of earnings,” said Marty Mosby, an analyst at Guggenheim Securities LLC, which manages more than $100 billion, including Bank of America stock. “They’re bringing down their balance sheet and increasing their capital ratios, which you hope helps them eventually pay a modest dividend.”
Bank of America surged 42 percent this year in New York trading, the best performance in the Dow Jones Industrial Average. Still, the lender’s shares lost almost half their value since Moynihan took over in 2010, compared with a 23 percent gain for the Dow Jones benchmark. The stock was little changed at $7.93 at 9:08 a.m. in New York trading.
“Brian has been doing exactly the things in terms of correcting problems for the past, exactly what I would be doing,” said Warren Buffett, whose Berkshire Hathaway Inc. invested $5 billion in the bank, in a July 13 interview with Bloomberg Television’s Betty Liu. “He’s done a terrific job. He’s gotten rid of one thing after another that was a problem. And he’s getting it back to basic banking.”
Companywide revenue fell 1.4 percent to $22 billion from the first quarter, reflecting lower contributions across most of the firm’s operations. The tally jumped from $13.2 billion a year earlier, when it was depressed by one-time costs of cleaning up defective mortgages.