Trading Gains Fuel 63% Rise in 2Q Profits at BofA

Despite more red ink inside its mortgage arm, Bank of America (NYSE:BAC) beat the Street on Wednesday with a 63% surge in second-quarter profits that was powered by solid trading profits and lower costs.

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Shares of the No. 2 U.S. bank by assets advanced 1% following the stronger-than-expected earnings.

BofA said it earned $4.01 billion, or 32 cents a share, last quarter, compared with a profit of $2.46 billion, or 19 cents a share, a year earlier. Analysts had been calling for EPS of 25 cents.

Revenue increased 3.5% to $22.73 billion, compared with the Street’s view of $22.79 billion.

The results demonstrate how BofA, once one of the most troubled big U.S. banks, continues to bounce back from the financial crisis and housing bust.

“We are doing more business with our customers and clients, and gaining momentum across every customer group we serve," BofA CEO Brian Moynihan said in a statement. "We must keep improving, but with the consumer recovering and businesses strong, we have lots of opportunity ahead."

BofA’s results were driven by nearly doubling profits in its global markets division to $959 million from $497 million the year before. Revenue jumped 17% to $611 million as higher equities sales and trading revenue surged 53% to $1.2 billion.

In a sign of improving credit conditions, BofA said its net credit loss rates were below 1% for the first time since 2006.

BofA was also helped by declining litigation expenses, which fell to $471 million during the second quarter from $963 million in the same period a year ago and $2.2 billion in the first quarter. Overall expenses tumbled by $1 billion to $16 billion.

Consumer and business banking revenue was largely flat at $7.43 billion as average deposit balances rose 10% to $522.3 billion.

On the mortgage front, BofA’s consumer real estate services division widened its loss to $937 million from $744 million the year before as revenue dipped to $2.12 billion from $2.53 billion. The bank cited lower servicing income driven by a smaller servicing portfolio.

BofA continues to improve its balance sheet amid pressure from new regulations, raising its Tier 1 common capital ratio to 10.83% from 10.49% in the prior quarter.

Shares of Charlotte-based BofA gained 1.08% to $14.07 in premarket trading on Wednesday morning, putting them on track to extend their 20% rally so far this year.