Helped by tight controls on expenses and lower credit losses, Bank of America swung to a profit in the second-quarter compared with a huge loss in the same period a year ago.þþThe bank, the second-largest in the United States after JPMorgan Chase, said on Wednesday that it had earned $2.5 billion, or 19 cents a share, exceeding analysts’ estimates.þþRevenue totaled $22.2 billion, slightly less than expected and below the level in the first quarter of 2012. Analysts had been expecting the company to earn 14 cents a share on revenue of $22.9 billion.þþThe weakness in revenues is a sign of the pressures big banks face in growing their business amid a weak economy and tighter regulations. But Bank of America was able offset those challenges with savings elsewhere.þþþThe latest figures stand in sharp contrast to Bank of America’s results in the period a year earlier, when huge mortgage-related charges contributed to a loss of $8.8 billion, or 90 cents a share.þþCredit losses dropped to $1.7 billion from $3.25 billion in the second quarter of 2012, reflecting what the company said were improving credit conditions for businesses and consumers as well as tighter lending standards.þþIn addition, the bank upped its projected cost-cutting targets under its “New BAC” restructuring initiative, predicting an additional $3 billion in savings by mid-2015.þþBank of America plans to cut more than 30,000 workers in the coming years. As of June 30, its headcount was down 3,228 to 275,460. The bank has 12,600 fewer employees than it did a year ago.þþBank of America’s results were more straightforward than in recent quarters, when one-time gains and losses made it difficult to gauge the bank’s underlying performance.þþOver all, Bank of America also managed to strengthen its balance sheet, which had been a worry of investors last year, when its stock briefly fell below $5 a share.þþBank of America’s stock was up 1 percent to $8 a share in premarket trading.þþThe company said its Tier 1 capital ratio under the Basel III agreements now stands at 8.1 percent, putting it ahead of the company’s earlier goal of 7.5 percent by the end of 2012.þþ“Once again, we had strong capital generation this quarter through a combination of earnings growth and a reduction in risk-weighted assets,” the bank’s chief financial officer, Bruce R. Thompson, said in a statement.þþProfits were also boosted by so-called reserve releases, when the bank reverses earlier charges for possible credit losses and adds the savings to the bottom line. In this case, of the $2.5 billion profit in the second-quarter, $1.9 billion came from reserve releases.þþIn a sign that the bank’s troubles on the mortgage front are far from over, Bank of America faced more intense pressure last quarter from investors who are trying to force the company to buy back soured mortgages it had sold them before the housing bubble burst.þþGovernment-controlled mortgage giants like Fannie Mae and Freddie Mac want the company to buy back $11 billion in bad mortgages, up from $8.1 billion. Meanwhile, private investors now are seeking $8.6 billion in buybacks, up from $4.9 billion.þ
Source: NY Times
