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Bank of America, America's second-biggest bank by assets reported better than expected second quarter earnings before the bell Monday following money center banks JPMorgan Chase $JPM. Wells Fargo $WFC, PNC Financial $PNC and  $C.  $BAC's  return on equity of 10.8% was it's first double-digit ROE in seven years.

In the Bank Charlie Chaplin Cut Off

Earnings

EPS soared 43% to 63 cents a share on adjusted revenue rising nearly 3% to $22.6 billion beating expectations of earnings per share of 59 cents, on revenue of $22.3 billion. Net income rose 33% to $6.8 billion.

Reaction: Bank of America NYSE $BAC

Pre- Market - $28.88 +0.34 (+.19 %)

Revenue Breakdown

  • Consumer banking, the bank's largest segment rose 8% to $9.2 billion, as deposits rose 5% to $688 billion.
  • Sales and trading revenue of $3.4 billion, including net debit valuation adjustment (DVA) of $(179) million
  • Excluding net DVA, sales and trading revenue up 7% to $3.6 billion(C)
  • Equities up 17% to $1.3 billion(C)
  • FICC up 2% to $2.3 billion(C)
  • Wealth management revenue increased slightly to $4.7 billion
  • Average loans and leases in business segments grew 5% – Consumer up 6% and commercial up 5%
  • Average deposits increased 3%
  • Merrill Edge brokerage assets increased 20%
  • Client balances within Global Wealth & Investment Management increased to nearly $2.8T

Credit Losses Improve

$BAC allocated $800 million for credit losses in the quarter, less than the $973.5 million expected by analysts. Non-performing loans fell half a billion dollars from the first quarter of 2018 on improvements in consumer and commercial debt.

While the bank grew loans and leases to $935.8 billion, that was below the $942 billion estimate.

"Responsible growth continued to deliver as a driver for every area of the company," CEO Moynihan said in a statement. "We grew consumer and commercial loans; we grew deposits; we grew assets within our Merrill Edge business; we generated more net new households in Merrill Lynch; and we supported more institutional client activity."

 

Bank of Amerca's First Quarter 2018 Earnings Recap

BAC Earnings Mix 4 16 18

Earnings

EPS soared 51% to 62 cents a share on adjusted revenue rising nearly 4% to $23.1 billion beating expectations of earnings per share of 59 cents, on revenue of $22.907 billion Net income rose 42% to $2.7 billion.

Reaction:

Bank of America $BAC

PreMarket $29.92 +0.09 (+.30 %)

“This was a strong quarter. Revenue was up 4% year-over-year and expenses were down 1%, making this the 13th consecutive quarter of positive operating leverage. We also carefully managed credit costs. We also returned $6.1 billion in capital to our shareholders through dividends and common stock repurchases,” said CFO Paul M. Donofrio.

Revenue Breakdown

  • Consumer Banking  rose  9% jump in its revenues to $9 billion
  • Global Wealth and Investment Management saw 6% revenue growth with loans in this segment up 7% to $159 billion.
  • Core lending rose 5%
  • Deposits rose 3%
  • Credit card charge-offs lower.
  • Sales and trading revenue increased by 6% to $4.1 billion
  • Trading revenue rose 3%, with a 38% spike in equity trading revenue and a 13% drop in fixed-income trading revenue.
  • Return on equity was 10.8%, the first double-digit ROE in seven years.

 

Previous Quarter Earnings

  • Bank of America $BAC Earnings Beat Estimates With Strong Trading Result
  • Bank of America $BAC Earnings Beats on Trading Income Rise

The bank rally had been fueled by expectations for easier regulations including a possible repeal of DoddFrank and infrastructure spending. The Federal Reserve decision to raise rates has also helped banks.  The new surge in home prices has also buoyed optimism for the mortgage business and banks profits thereto.

Source: BAC, AlphaStreet

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