BofA Loss Clouds Credit Improvements

Bank of America Corporation (NYSE: BAC) is following Citigroup, Inc. (NYSE: C) and JPMorgan Chase & Co. (NYSE: JPM) by beating earnings expectations.  Many of the headlines will describe a loss of more than $7 billion after a goodwill charge, but the bank beat earnings expectations on an operational basis. The large magnitude of the loss will probably grab most of the headlines.

The bank’s third quarter earnings were $0.27 EPS rather than the $0.16 estimate.  Revenues were up about 2% at $26.98 billion, shy of the $27.15 billion estimate from Thomson Reuters.

Capital versus Q2:

• Tier 1 common was 8.45% vs 8.01%;
• tier 1 capital 11.16% vs. 10.67%;
• tangible common equity 5.77% vs 5.36%;
• tangible book value rose to $12.91, up 6.3% sequentially and up 7.6% from year ago.

Net interest income rose 8% but net of interest expense it was down 8% from last quarter.  The bank showed lower loan levels was impacted by the no-rate or low-rate environment.

Provision for credit losses was $5.4 billion, down from $8.1 billion sequentially and less than half the year ago levels.  Net charge-offs fell by $2.4 billion based upon the consumer and commercial portfolio improvement on continued improvement in delinquencies.

JON C. OGG