Bank of America reports nearly $6 billion profit

Tuesday, Oct. 18, 2011 1:36 PM
Last updated 1:41 PM
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  LUCAS JACKSON
LUCAS JACKSON

CHARLOTTE, N.C. – Bank of America Corp. reported a third-quarter profit, boosted by accounting gains, but its main businesses struggled as income from lending and investment banking fell.

But the bank’s shares rose as some analysts and investors were heartened by higher-than-expected profit and an increase in quarterly revenue. The stock, which has been volatile, has fallen more than 50 percent since mid-January.

“Earnings were very good -- surprisingly good -- especially the revenue, surprisingly good in a very tough quarter,” said Tim Ghriskey, chief investment officer at Solaris Asset Management in Bedford Hills, N.Y.

Asset sales contributed to Bank of America’s ceding its ranking as the largest U.S. bank by assets to JPMorgan Chase & Co. Bank of America fell to No. 2.

Chief Executive Brian Moynihan is under pressure to prove he is turning around the Charlotte, N.C.-based bank, which has been besieged by mortgage losses and lawsuits. Moynihan has secured a $5 billion investment from Warren Buffett’s Berkshire Hathaway Inc and plans to slash 30,000 jobs over the next few years.

But the bank has faced a backlash over its plan to charge customers $5 per month to use debit cards. Many shareholders also remain unconvinced about Moynihan’s plans, especially if asset sales reduce potential sources of revenue.

“The key then now is going to be, as revenues are going to be more subdued, is to get more cost out,” Moynihan said on a conference call.

Quarterly net income for shareholders was $5.89 billion, or 56 cents per share, compared with a loss of $7.65 billion, or 77 cents per share, a year earlier, when the bank took a $10.4 billion accounting charge. Revenue rose 6 percent to $28.7 billion.

Bank of America recorded $9.8 billion of pretax benefits from two accounting gains and from selling China Construction Bank Corp. shares. It also took a pretax loss of $2.2 billion for private equity and strategic investments.

Net interest income fell to $10.74 billion from $12.72 billion a year earlier, while net interest margin, or what the bank makes in loan interest versus what it pays for deposits, shrank to 2.32 percent from 2.72 percent.

“I’m not very pleased with the results,” said Bill Hassiepen, senior analyst at credit rating agency Egan-Jones Ratings Co. “Core earnings appear very suspect.”

Other major banks such as JPMorgan and Wells Fargo & Co also posted shrinking margins. Quarterly profit rose at Wells Fargo and at Citigroup Inc. but fell at JPMorgan.

Bank of America’s noninterest expense, excluding a goodwill writedown a year earlier, rose 4.7 percent to $17.6 billion.

Total employment edged up to 288,739 on Sept.30 from 288,084 three months earlier, but about 2,000 employees have been told they will be let go.

The overhang from Bank of America’s mortgage exposure persisted: the mortgage unit lost $1.1 billion in the third quarter, nearly triple the $392 million loss a year ago.

Analysts believe the bank’s $2.5 billion purchase in 2008 of Countrywide Financial Corp., once the largest U.S. mortgage lender, has cost more than $30 billion because of writedowns and lawsuits, and that the figure could rise further.

The unit recorded $500 million of pretax litigation expenses. And despite a boom in home refinancings, the bank originated just $33 billion of home loans, down from $40.4 billion in the prior quarter and $71.9 billion a year earlier.

“We are working very hard to continue to work through the delinquent portfolio,” Moynihan said. “There do continue to be some open items on mortgage. But we feel like we have done everything we can at this point.”

Thompson said the bank expected to continue selling pieces of its mortgage servicing rights, and should finish shedding its correspondent mortgage business by year-end.

As global dealmaking dried up, the bank’s global banking and markets unit lost $302 million, compared with profit of $1.56 billion in the prior quarter and $1.47 billion a year earlier. Revenue from investment banking and trading fell 36 percent and 22 percent, respectively, from the second quarter.

That unit comprises much of Merrill Lynch & Co’s former operations that Bank of America bought at the height of the 2008 global financial crisis. It had been a key source of profit as other businesses hemorrhaged money.

Results from credit cards also weakened, as profit fell 35 percent from the second quarter to $1.26 billion.

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floridasun
343
Points
floridasun 10/18/11 - 02:47 pm
0
0
I thought B of A recently

I thought B of A recently announced they were laying off around 30,000 people. They are having a pretty good year to lay off that number of people!

Little Lamb
48010
Points
Little Lamb 10/18/11 - 03:11 pm
0
0
They'll have an even better

They'll have an even better year in 2012 after they lay off 30,000 unnecessary employees.

copperhead
1035
Points
copperhead 10/18/11 - 07:38 pm
0
0
Any and all businesses that

Any and all businesses that made a profit should be seized by the government and redistributed amoung the people. Everybody,no matter their drive or abilities,should be paid the same. From ceo to stockperson,SAME pay.

KSL
140454
Points
KSL 10/18/11 - 08:51 pm
0
0
Yep, especially a bank that

Yep, especially a bank that didn't want bailout money but was forced to take it by our kindly government.

KSL
140454
Points
KSL 10/18/11 - 08:54 pm
0
0
In a closed room meeting, by

In a closed room meeting, by the way.

omnomnom
3964
Points
omnomnom 10/18/11 - 09:39 pm
0
0
uh. i think you gots it

uh. i think you gots it backward ksl

KSL
140454
Points
KSL 10/18/11 - 10:07 pm
0
0
Study the history of BAC. See

Study the history of BAC. See how they after government interference they were affected and how they were when it subsided. Hey, come interview me. I am/was in real estate when BAC, then by another name, were forced to give out loans to people who had no about home ownership and what they needed to do. H**l, I had a woman come out of a house next door to a house I was dealing with asking me after 3 months of taxpayer ownership asked me how to get out of having to pay for a house.Thank you very much, Mr. Bill Clinton and your regulations.

KSL
140454
Points
KSL 10/18/11 - 10:02 pm
0
0
And no, Omn, you have it

And no, Omn, you have it backwards. I suspect you are young.

KSL
140454
Points
KSL 10/18/11 - 10:04 pm
0
0
If you are speaking of the

If you are speaking of the backroom arm twisting meeting, give it a search. It was quite the news when it happened. Where were you?

omnomnom
3964
Points
omnomnom 10/18/11 - 10:41 pm
0
0
ok. they take a risk to

ok. they take a risk to acquire merrill lynch, it turned out to be a loser. they go crying to hank for TARP2. they protested too much during the first round of tarp saying they didn't want/need it. i'll admit govt. is part of the problem, but ken lewis took a huge gamble. lost. and still got paid off. if we cleansed the market of these too big to failures, this depression would've only lasted a few years.. now it'll take the better part of a decade (at least). and where was i? i was working. not in your field, but i keep up on the economy enough to know that finance should not be doing as well as it is now. its all shadow money.

omnomnom
3964
Points
omnomnom 10/18/11 - 10:51 pm
0
0
charliemanson
1
Points
charliemanson 10/19/11 - 03:29 am
0
0
"They'll have an even better

"They'll have an even better year in 2012 after they lay off 30,000 unnecessary employees."
_____________________________________________

>Currently, at less than $7 a share, Bank of America's stock should be a pretty good gamble as a long-term investment.

fftaz71
108
Points
fftaz71 10/19/11 - 06:42 am
0
0
Bank of America does not

Bank of America does not stand behind their customers...nor do they stand behind their employees. All they care about is money- how they get it does not matter. I left after a problem with my checking account resulted in roughly 300.00 in bounced check fees (b/c I opened my account in another state, the notifications go first to that states BoA hq and THEN get forwarded to my address- a week later). I spoke to customer service via the phone, they agreed the issue was not caused by me, refunded the fees. The next day I look online at my account and all the fees are back. I went to a local branch, where they pretty much told me too bad...its not our fault. It wasnt mine either. When I asked for something in writing so I could go after the party at fault, they told me we arent allowed to do that. I could have only had one bounced check out of this if it werent for their shady practice (which btw, there is a class action lawsuit taking place) of debiting the highest charge first despite that one being the last one presented. Had they taken the charges out in order of presentation, I wouldve had one that didnt clear...but since they did it the way they did, it caused 3. By the time I got the notice of the first bounced check, they had already run all 3 of them 3 times....and of course I got nailed 30.00 each time. After that incident I ran from them....and went straight to a credit union.

mtxbass1
0
Points
mtxbass1 10/19/11 - 06:51 am
0
0
floridasun. Bank of America

floridasun. Bank of America hasn't let 30,000 people go YET. Had you read the article you would have noticed this.

"Total employment edged up to 288,739 on Sept.30 from 288,084 three months earlier, but about 2,000 employees have been told they will be let go."

shrimp for breakfast
5503
Points
shrimp for breakfast 10/19/11 - 07:13 am
0
0
And they want more money by

And they want more money by charging for using a debit card.
Amazing!

bdouglas
5588
Points
bdouglas 10/19/11 - 07:52 am
0
0
@shrimp Heck yeah they do, at

@shrimp Heck yeah they do, at 57 million customers, that's another cool $228 million in their pockets. Because, let's face it, these card processing fees they're passing on to us didn't just start this year, and they had no issue making $6B in profit without that $4/customer.

Chillen
17
Points
Chillen 10/19/11 - 08:32 am
0
0
Haven't Americans gotten the

Haven't Americans gotten the message yet?

Profits are evil. Banks are evil. These banks should operate as a non-profit or at a loss and ONLY exist to provide jobs for Americans.

What is wrong with you people?!

((extreme sarcasm intended))

david jennings
624
Points
david jennings 10/19/11 - 12:31 pm
0
0
Maybe the occupiers should

Maybe the occupiers should abandon the Augusta Common and go stand in front of BA.

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