Bank of America, seeking to move on from its legal and mortgage troubles and get on with the business of banking, said on Wednesday that its second-quarter profit more than doubled from a year ago, easily surpassing analysts’ expectations.þþThe bank earned $5.3 billion in the quarter, up from $2.3 billion in the quarter a year ago. On an earnings-per-share basis, the bank earned 45 cents a share in the second quarter, up from 19 cents a share from a year ago. Those results far exceeded analysts expectations of 36 cents at a time when many critics had begun questioning the bank’s stagnant share price and recent history of lackluster performance.þþIts revenue also increased 2 percent, to $22.3 billion from a year ago. Analysts had been expecting revenue of $21.3 billion, according to a survey by Thomson Reuters.þþPlagued for years by soaring litigation costs related to its mortgage problems, the bank reported a broad decline in expenses. Excluding litigation costs in the second quarter, Bank of America said its expenses declined 6 percent from a year ago, while the costs of servicing its troubled mortgage portfolio dropped 37 percent. Investors have been clamoring to see the bank make more progress in cutting expenses in recent quarters to offset the impact of low interest rates.þþAfter years of working to bring down expenses, particularly in its legacy mortgage unit, bank executives said the fruits of that effort were finally paying off.þþ“We think it was a giant step forward this quarter for the company,” Bruce R. Thompson, Bank of America’s chief financial officer, said in a conference call with reporters on Wednesday morning.þþThe bank’s chief executive, Brian T. Moynihan, said in a statement: “Solid core loan growth, higher mortgage originations and the lowest expenses since 2008 contributed to our strongest earnings in several years, as we continued to build broader and deeper relationships with our customers and clients.”þþThe bank was also helped by an increase in long-term interest rates in the quarter, which bolstered the value of its vast holding of Treasury and other debt securities. Bank of America uses a mark-to-market valuation for its debt securities holdings, which can cause their value to swing more immediately than other big banks.þþThe impact of the interest rate move generated $669 million, or 4 cents a share, in income in the second quarter. A year ago, the impact of rates at the time on the bank’s debt portfolio related in negative adjustments of $175 million.þþThe move in the bank’s debt securities holding foreshadowed that boon that Bank of America and other large banks could receive if the Federal Reserve raises rates in the next few months. Many bank investors have been patiently waiting out the struggles at banks like Bank of America in hopes that the companies’ share prices would increase as interest rates rise from historic lows.þþIn premarket trading, shares of Bank of America were up about 2 percent.þþ
Source: NY Times
