Bank of America on Wednesday became the latest large bank to report second-quarter financial results that exceeded Wall Street’s expectations.þþNet income rose 63 percent, to $4 billion, or 32 cents a share, from $2.5 billion, or 19 cents a share, in the period a year earlier, while revenue increased to $22.7 billion from $22 billion.þþAnalysts had been expecting second-quarter earnings per share of 25 cents, according to Thomson Reuters.þþThe bank benefited from higher revenue from equities sales and trading and a reduction in expenses, but its mortgage unit continued to struggle.þþ“We are doing more business with our customers and clients, and gaining momentum across every customer group we serve,” Brian T. Moynihan, the bank’s chief executive, said in a statement. “We must keep improving, but with the consumer recovering and businesses strong, we have lots of opportunity ahead.”þþDespite the big rise in earnings, investors may question the strength of the quarter.þþWhile revenue rose, much of the increase came from Bank of America’s Wall Street businesses, whose performance can be uneven over longer periods.þþProfit also received a lift from lower expenses. The bank paid substantially less interest on its own borrowings, compared with the second quarter of 2012. It also set aside less for its bad loan reserve and spent substantially less on mortgage litigation expenses.þþBank of America also provided estimates of how it would fare under a new, proposed rule that focuses on capital, the financial buffer banks are required to maintain to absorb losses.þþInvestors are fixated on this issue right now, fearing that the largest banks might have to raise large amounts of new capital to comply with the rule.þþBut Bank of America may already meet the requirements, according to estimates the bank provided on Wednesday. The rules require a so-called leverage ratio of 5 percent at a bank’s holding company.þþBank of America estimated on Wednesday that its leverage ratio would be 4.9 to 5 percent at its parent company. The proposed rules also require a 6 percent ratio at banking subsidiaries that are covered by federal deposit insurance. Bank of America’s chief financial officer, Bruce R. Thompson, said during a news briefing last Thursday that he thought the two largest subsidiaries already had enough capital to comply with the 6 percent requirement.þþA vast financial supermarket, Bank of America makes loans to consumers and companies and has a big presence on Wall Street. Since the financial crisis, the bank has struggled to reassert itself in crucial businesses. It was particularly hampered by large and lingering losses stemming from Countrywide Financial, the mortgage giant it acquired in 2008.þþBank of America’s shares have risen nearly 80 percent in the last 12 months as investors have bet that the bank would overcome its problems.
Source: NY Times
