Bank of America Corp. (BAC: Quote) on Wednesday reported a solid profit for the second quarter, reflecting higher mortgage banking income, absence of last year's goodwill impairment charge and improved credit quality. Provision for credit losses declined 46 percent from the year-ago quarter.
Brian Moynihan, CEO, said, ''In a challenging global economy, we still see opportunities to do more with our customers and clients. Lending to commercial businesses increased for the sixth straight quarter - with small business lending and commitments up 23 percent in a year - and consumer credit is in the best shape in years."
Total provision for credit losses plunged to $1.77 billion from $3.26 billion. BofA noted that bad loan provision declined to its lowest level since the first quarter of 2007 as credit quality continues to improve.
As of June 30, the company's Basel 3 Tier 1 common capital ratio on a fully phased-in basis was estimated at 8.10 percent. BofA's previous guidance was to achieve a Basel 3 Tier 1 common capital ratio of more than 7.50 percent on a fully phased-in basis by the end of 2012.
Net income applicable to common shareholders was $2.1 billion, compared to a loss of $9.13 billion last year and a profit of $328 million in the first quarter of the current fiscal. Earnings per share stood at $0.19 in comparison with a loss of $0.90 last year.
On average, 24 analysts polled by Thomson Reuters expected earnings per share of $0.14 for the quarter. Analysts' estimates typically exclude one-time items.
The year-ago quarter included $18.2 billion in pretax charges for certain mortgage-related items and other selected adjustments.
Total revenue, net of interest expense, climbed to $21.97 billion from $13.24 billion but was slightly lower than the previous quarter's $22.28 billion. Analysts estimated revenues of $22.87 billion for the quarter.
On a fully taxable-equivalent or FTE basis, total revenue, net of interest expense, increased to $22.2 billion from $13.48 billion in 2011.
In Consumer and Business Banking, profit more than halved to $1.2 billion as revenue declined, due to lower average loans, continued low rate environment, and higher credit costs.
Global Wealth and Investment Management reported 6 percent higher profit at $543 million, as lower revenue was more than offset by decreases in non-interest expense and lower provision for credit losses.
Consumer Real Estate Services narrowed its loss, amid improved revenues and a sharp decline in provision for credit losses.
The business recorded higher mortgage-related charges last year, including $14 billion in representations and warranties provision, a $2.6 billion non-cash goodwill impairment charge and $2.6 billion in other mortgage-related costs.
The benefit from provision for credit losses narrowed in Global Banking. Profit declined amid decreased revenues, primarily due to lower investment banking fees, lower rate environment and accretion on certain acquired portfolios.
Global Markets revenue declined nearly 24 percent to $3.4 billion, due to lower trading volumes, new issuance activity and client flows. The business reported a sharply lower profit.
Within the business, Fixed Income, Currency and Commodities sales and trading revenue, excluding DVA, was $2.6 billion, flat from the year-ago quarter, but $1.6 billion lower sequentially. BofA noted that market uncertainty due to the eurozone crisis and slower economic growth contributed to a decline in trading volumes and a lower appetite for risk among investors.
Among peers, JP Morgan Chase & Co. (JPM: Quote) last week reported a marginal drop in first-quarter profit, amid a solid performance by the Retail Financial Services division and a plunge in bad loan provision. Revenues increased year-over-year.
BAC, which closed at $7.92 on Tuesday, is up over 1 percent in pre-market activity.
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by RTT Staff Writer
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