Bank of America Earnings Boosted by Lower Costs

Banking, finance, and taxes

Published: July 15, 2015 7:50 am

Last Updated: April 27, 2020 5:19 pm

Bank of America Corp. (NYSE: BAC) reported second-quarter results before markets opened Wednesday morning. The most heavily traded of the big bank stocks reported diluted earnings per share (EPS) of $0.45 on revenue of $22.35 billion. In the same period a year ago, it reported EPS of $0.19 on revenue of $21.96 billion. Second-quarter results also compare to the consensus estimates for EPS of $0.36 on revenue of $21.32 billion.

The credit loss provision totaled $780 million in the quarter, up by $369 million compared with the same period in 2014. Net charge-offs declined by $329 million (26%) to $929 million. The drop in net charge-offs was attributed to an improvement in consumer portfolio trends. The second-quarter 2015 reserve release of $228 million compared with the year-ago total of $662 million.

Non-interest expenses dropped 25% to $13.8 billion. Litigation expenses dropped from $4 billion in the second quarter of last year to $175 million. Excluding litigation expenses, non-interest expenses fell 6%.

The bank did not provide guidance in its earnings release. The consensus estimate for third-quarter EPS is $0.35 on revenues of $21.13 billion. For the full year, the consensus calls for EPS of $1.34 on revenues of $85.46 billion.

The bank’s net interest margin rose by 15 basis points year over year, from 2.22% to 2.37%, which usually indicates that a bank is earning more in interest on deposits than it is paying for funding the loans it has made. This may be the single best piece of news in Bank of America’s report.

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Brian Moynihan, the bank’s CEO, said:

Solid core loan growth, higher mortgage originations and the lowest expenses since 2008 contributed to our strongest earnings in several years, as we continued to build broader and deeper relationships with our customers and clients. We also benefited from the improvement in the U.S. economy, where we are particularly well positioned.

Bank of America increased its estimated Basel III Tier 1 transition common ratio to 11.2% in the second quarter. The bank also raised its tangible book value per share by $0.78 to $15.02.

Shares traded about 3.2% higher in the premarket Wednesday to $17.68. The current 52-week range is $14.84 to $18.21. Thomson Reuters had a consensus analyst price target of around $18.30 before the results were announced.

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