By RTT News,
July 16, 2014, 08:34:00 AM EDT
(RTTNews.com) - Financial services major Bank of America Corp. ( BAC ) reported Wednesday a profit for the second quarter declined from last year, despite lower loan loss provisions, hurt by hefty litigation expenses.
The company's earnings per share missed analysts' expectations, while quarterly revenues topped their estimates by a whisker.
Separately, American International Group, Inc. ( AIG ) reached a $650 million settlement with Bank of America to resolve all outstanding residential mortgage-backed securities (RMBS) litigation between them. The settlement will see AIG filing for dismissal of its securities lawsuits against Bank of America and its affiliates pending in California and New York federal courts.
"The economy continues to strengthen, and our customers and clients are doing more business with us. Among other positive indicators, consumers are spending more, brokerage assets are up by double digits and our corporate clients are increasingly turning to us to help finance business expansion and merger activity. We are well positioned for further progress," CEO Brian Moynihan said in a statement.
The Charlotte, North Carolina-based company reported net income applicable to common shareholders of $2.04 billion or $0.19 per share for the second quarter, lower than $3.57 billion or $0.32 per share in the prior-year quarter.
On average, 21 analysts polled by Thomson Reuters expected the company to report earnings of $0.29 per share for the quarter. Analysts' estimates typically exclude special items.
The results for the latest quarter include a pre-tax $4.0 billion or $0.22 per share of litigation expense, which also include the $650 million settlement with AIG.
The company also racked up legal costs to deal with negotiations with Justice Department over charges related to mortgage securities it sold before the financial crisis. Reports indicate that a settlement may soon result in fines of up to $12 billion, after rival Citigroup Inc.( C ) reached a deal to pay $7 billion in the mortgage probe.
The company said its total revenue, net of interest expense, for the quarter declined 4 percent to $21.75 billion from $22.73 billion in the same quarter last year, but topped twenty-three Wall Street analysts' consensus estimate of $21.61 billion by a whisker.
Net interest income decreased 5 percent to $10.01 billion, and noninterest income was $11.73 billion, 4 percent lower than $12.18 billion last year.
Noninterest expense increased to $18.54 billion from $16.02 billion in the year-ago quarter, driven primarily by higher litigation expense. Excluding litigation expense of $4.0 billion, it was down 6 percent from last year to $14.6 billion
Profit for the global wealth & investment management declined to $724 million from $759 million, while consumer & business banking profit grew 29 percent to $1.79 billion, and global banking profit increased to $1.35 billion from $1.30 billion last year.
The consumer real estate services division reported a $2.80 billion loss, wider than the $930 million loss last year, while global markets profit grew to $1.10 billion from $962 million a year ago.
Bank of America's total provision for credit losses for the second quarter plunged 66 percent to $411 million from last year's $1.21 billion.
The company noted that credit quality continued to improve with net charge-offs declining 49 percent from last year. Total net charge-offs were $1.07 billion or 0.48 percent, lower than last year's $2.11 billion or 0.94 percent.
"During the quarter, our Basel 3 capital ratios improved and credit losses remained near historical lows. In addition, we did a good job managing expenses. Although litigation expenses were higher than the year-ago quarter, total noninterest expense, excluding litigation, declined 6 percent from the second quarter of 2013," CFO Bruce Thompson added.
BAC closed Tuesday's regular trading session at $15.81, up $0.06 on a volume of 99.95 million shares. In the past 52-week period, the stock has been trading in a range of $13.60 to $18.03.
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