(Corrects paragraph 14 to note that expense cuts aim to bring
costs to $53 billion from $58 billion, not the other way
By Richa Naidu and Dan Freed
Oct 17 Bank of America Corp, the
second-largest U.S. bank by assets, reported its first profit
increase in three quarters on Monday, foiling expectations for
another drop, as bond trading surged and expenses fell.
Like rivals JPMorgan and Citigroup, Bank of
America enjoyed a boost from a resurgence in trading. That came
as clients scrambled to reposition after Britain's surprise June
vote to leave the European Union, and changing expectations for
monetary policy in the United States, Europe and Japan.
Chief Executive Brian Moynihan's cost-cutting campaign also
paid off as expenses fell in each of its four major business
On a pretax basis, quarterly profit was at its highest in a
decade. Net income attributable to shareholders rose 6.6 percent
to $4.45 billion in the third quarter ended Sept. 30 from a year
ago. Earnings per share rose to 41 cents, from 38 cents in the
same period of 2015. Analysts, on average, had estimated a
decline to 34 cents a share.
Revenue grew 3 percent to $21.64 billion, beating the $20.97
billion expected by analysts.
Net profit in Bank of America's trading-focused Global
Markets arm jumped 34 percent from a year earlier as revenue
from dealing fixed-income securities, currencies and commodities
surged 39 percent. Equity trading revenue fell 17 percent.
Last week, JPMorgan reported a 48 percent increase in bond
trading and Citi posted a 35 percent gain. Trading in stocks
rose 1 percent and fell 34 percent respectively at JPMorgan and
Like Bank of America, JMorgan, Citigroup and Wells Fargo
beat third-quarter profit and revenue forecasts but their net
earnings declined; JPMorgan Chase & Co's by 7.6 percent,
Citigroup Inc's by 10.5 percent and Wells Fargo & Co's
by 3.7 percent.
Shares of Bank of America were little changed, falling just
0.03 percent in early trading. Ahead of Monday, the stock had
shed 4.9 percent since the start of the year, compared to a 2.5
percent decline in the KBW banking index.
After scandal-ridden Wells Fargo & Co separated its
chief executive and chairman roles last week with the retirement
of John Stumpf, Moynihan was asked during a
conference call on Monday whether he expected renewed pressure
to give up his dual role from regulators or shareholders.
"Our lead independent director duty is as strong as
anybody's in the industry," said Moynihan, who had faced down a
shareholder vote last year over whether to split the roles.
He added that he felt "comfortable" with the bank's
Bank of America's large stock of deposits and rate-sensitive
mortgage securities make it particularly dependent on a rise in
interest rates to boost profits.
To compensate for stubbornly low interest rates, Moynihan
made trimming costs a top priority, saying in July he would cut
annual expenses by another $5 billion by 2018, which would take
the total to about $53 billion from about $58 billion in 2015.
In the third quarter, non-interest expenses fell 3.3 percent
to $13.48 billion as headcount fell by 3 percent.
Like rivals, Bank of America got a boost from a rise in the
London interbank offered rate, or Libor, a benchmark for more
than $300 trillion worth of financial products worldwide.
Libor moved to a seven-year high during the third quarter as
U.S. money market funds scaled back holdings in short-term bank
debt in advance of new regulations.
Bank of America's net interest income rose 3 percent to
$10.20 billion, the first increase in three quarters.
Like JPMorgan and Wells Fargo, BofA set aside more money to
cover potential bad loans. The bank's provisions rose 5.5
percent to $850 million in the quarter.
Income from investment banking rose 13.3 percent to $1.46
billion, driven by higher debt and equity issuance activity.
Revenue for advising on deals tumbled 19 percent as
companies held off making acquisitions amid political
uncertainty in the United States and Brexit-related volatility
Adjusted revenue from Bank of America's wealth and
investment management unit, which includes Merrill Lynch, fell
1.7 percent to $4.38 billion, but a 6 percent drop in
non-interest expenses helped to boost net income by 10 percent.
The wealth business, which has been a stable source of
revenue growth when trading and investment banking revenues have
fluctuated, is undergoing its own changes, with a new boss,
longtime executive Andy Sieg, expected to take over in 2017 and
amid a regulatory overhaul of financial advice in the United
(Additional reporting by Elizabeth Dilts and David Henry;
Writing by Carmel Crimmins; Editing by Ted Kerr and Bernadette