Bank of America Profit Climbs, Despite Trading Slowdown -- Update
October 13 2017 - 7:57AM
Dow Jones News
By Rachel Louise Ensign
Bank of America Corp. said its third-quarter profit rose to
$5.59 billion as the bank inched closer to meeting its
profitability goals.
Quarterly profit at the second-largest U.S. bank by assets rose
13% from $4.96 billion a year earlier. Per-share earnings of 48
cents were up from a year earlier and topped analyst expectations
of 45 cents a share.
Third-quarter revenue was $21.84 billion, up from $21.64 billion
a year earlier. On an adjusted basis, revenue was $22.08 billion,
up from $21.86 billion a year earlier. Analysts had expected $21.98
billion.
Bank of America's quarterly return on equity was 8.1%, up from
the prior quarter, but below the bank's 10% theoretical cost of
capital.
After an initial lift from last November's election, Bank of
America shares climbed 4.6% in the past month as long-term bond
yields have risen, a metric that is expected to benefit the bank's
lending profits.
Bank of America also got an important vote of confidence in
August when Warren Buffett's Berkshire Hathaway Inc. officially
became the bank's largest shareholder, a result of an investment
Berkshire initially made in 2011. Since then, Mr. Buffett has
publicly praised Bank of America chief Brian Moynihan and said his
firm plans to be a shareholder for a long time.
Bank of America's large base of U.S. deposits and rate-sensitive
mortgage securities makes it particularly poised to benefit from an
uptick in interest rates. The bank's net interest income rose to
$11.16 billion, though it started to pay slightly higher rates to
depositors in the quarter. The rate the bank paid on U.S.
interest-bearing deposits was 0.24%, compared with a rock-bottom
0.11% in the prior quarter.
The Charlotte, N.C.-based lender faced some headwinds in the
third quarter. The bank and other major lenders warned that trading
revenue would be under pressure. And while long-term interest-rates
have risen recently, they were low for much of the quarter.
Trading revenue at Bank of America, excluding an accounting
adjustment, fell 15% to $3.15 billion from $3.73 billion in last
year's third quarter.
Quarterly expenses edged down 2.5% to $13.14 billion, from
$13.48 billion a year ago. Mr. Moynihan has made cost cutting a key
tenet of his business strategy and last year promised to cut $5
billion in annual expenses by 2018.
Shares rose 0.5% premarket.
Write to Rachel Louise Ensign at rachel.ensign@wsj.com
(END) Dow Jones Newswires
October 13, 2017 07:42 ET (11:42 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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