Bank of America Q1 Profit Per Share Falls Short of Estimates

Second-Biggest US Bank Focused on Slashing $8 Billion in Costs by 2015

Bank of America Q1 Profit Per Share Falls Short of Estimates

Bank of America’s shares lost 3.3 percent in New York pre-market trading on Wednesday after the lender reported first-quarter profit per share that missed analysts’ estimates.

The second biggest U.S. bank reported first-quarter net income of $2.62 billion (₤1.72 billion), four times the figure posted a year earlier. However, on a per-share basis, which includes dividends, the bank reported profit of $0.20, up from $0.03 a year earlier but below the $0.22 forecast by analysts polled by

Thomson Reuters and the $0.23 projected in a Bloomberg survey of analysts.

Overall revenue for the quarter increased five percent to $23.7 billion (₤15.5 billion), above analysts’ expectations of $23.41 billion (₤15.3 billion), on the back of improved trading performance. While profit quadrupled, most of the gains came from the bank’s efforts to clean up its balance sheet which failed to impress investors.

"Solid increases in loan growth to small businesses and middle-market companies, four straight quarters of steady growth in mortgage originations, record earnings in wealth management, and another quarter near the top in investment banking fees show we are balanced, focused and moving forward," Brian T. Moynihan, Bank of America’s chief executive, said in a statement.

Moynihan has settled more than $40 billion (₤26.2 billion) in mortgage claims, sold more than $60 billion (₤39.3 billion) in assets and fixed Bank of America’s balance sheet since he took the helm in 2010. The CEO is now focused on slashing $8 billion (₤5.24 billion) in annual expenses by 2015 and expanding revenue. The bank showed signs of progress in this direction in the first quarter, with total expenses falling 5.2 percent year-on-year to $18.15 billion (₤11.9 billion).

“There were many examples of progress this quarter,” Bank of America’s chief financial officer Bruce R. Thompson said in a corporate statement on Wednesday. “We reduced noninterest expense by nearly $1 billion (₤656 million) year-over-year, and credit costs continued to decline.” Credit-loss provisions were $1.71 billion (₤1.12 billion), compared with $2.42 billion (₤1.6 billion) a year earlier.

On the dark side there was a drop in mortgage banking income and falling gains from debt securities sales which put pressure on the results.

Bank of America’s core consumer and business banking arm, which includes its branch banking and loans to small businesses, reported revenue of $7.2 billion (₤4.7 billion) and net income of $1.38 billion (₤905 million), 4.4 percent below the $1.45 billion (₤951 million) recorded in the same period last year. The global banking business, which includes the bank’s mergers and acquisition bankers, reported net income falling by 15 percent to $1.34 billion (₤878 million).

Bank of America was the last of the four biggest US lenders to publish its quarterly results. JPMorgan Chase, the largest US bank, reported record earnings as credit quality improved. Wells Fargo saw income increase by 22 percent helped by cost cuts and Citigroup posted a 30 percent rise as figures from fixed-income trading and investment banking topped analysts’ expectations.

Bank of America’s share price was $11.92 as of 17.04.2013, 15.00 GMT.

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