Bank of America Corp (NYSE:BAC), the No. 2 U.S. bank by assets, reported its biggest quarterly profit in nearly four years on Wednesday as mortgage banking revenue soared and expenses fell to their lowest since the financial crisis.
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BofA's legal expenses, which have totaled at least $70 billion since 2008, dropped for the second straight quarter, suggesting the worst of the bank's legal problems stemming from the financial crisis was behind it.
Net income attributable to Bank of America's shareholders more than doubled to $4.99 billion, or 45 cents per share, in the second quarter ended June 30 from $2.04 billion, or 19 cents per share, a year earlier.
Analysts on average had expected earnings of 36 cents per share, according to Thomson Reuters I/B/E/S. However, it was not clear if the reported figures were comparable.
Litigation expenses, which had undermined the cost-cutting initiatives introduced by Chief Executive Brian Moynihan since he assumed the top job in 2010, fell to $175 million from $4 billion a year earlier.
"We also benefited from the improvement in the U.S. economy, where we are particularly well positioned," Moynihan said.
BofA's shares were up about 3 percent at $17.63 in morning trading on the New York Stock Exchange.
The bank's non-interest expenses fell 25.5 percent to $13.82 billion in the quarter, while net interest income rose 4.7 percent to $10.49 billion. Overall revenue, excluding adjustments, rose 1.7 percent to $22.12 billion.
MORTGAGE REVENUE JUMPS
The fourth-biggest U.S. mortgage lender said its mortgage banking revenue almost doubled to $1 billion.
More than half of the quarter's new mortgage loans were for home purchases, rather than the refinancings that previously drove revenue in the business.
BofA said its income from investment and brokerage services rose 3 percent to $3.39 billion, while revenue from the bank's Merrill Lynch Global Wealth Management business was little changed at $3.79 billion.
Moynihan, on a conference call with analysts, said Merrill Lynch still had more work to do on expense management.
Revenue from bond trading fell 9.3 percent to $2.15 billion.
JPMorgan Chase & Co <JPM.N>, the biggest U.S. bank, said on Tuesday its revenue from fixed-income trading fell 21 percent.
Banks were expected to report muted results from bond trading as the Greek debt crisis and uncertainty about the timing of a U.S. rate hike unsettled investors.
However, BofA is less exposed to interest rate-sensitive government securities than some of its competitors, focusing more on trading credit instruments such as corporate bonds.
The bank will also move slowly to increase rates on desposits if the Fed raises rates this year, he added.
Thompson said BofA's headcount was 7 percent lower in the second quarter compared with the same quarter last year and that he expected a further decline. BofA had 220,000 full-time employees as of March 31.
Goldman Sachs Group Inc <GS.N> and Citigroup Inc <C.N> will report results on Thursday and Morgan Stanley <MS.N> on Monday.
(Additional reporting by Neha Dimri in Bengaluru; Editing by Ted Kerr)