Banking, finance, and taxes
BofA Earnings Stunner: Overcomes Massive DOJ Settlement
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Bank of America Corp. (NYSE: BAC) has reported its third-quarter earnings, and the bank made money on a net basis, despite huge charges. Earnings were low, with net income of $168 million, but the per-share loss was $0.01 after preferred dividends. Revenue was $21.21 billion. Thomson Reuters had estimates of -$0.09 in earnings per share and $21.36 billion in revenue.
Keep in mind that these results include that massive Department of Justice settlement, outlined as $5.3 billion pretax, or $0.43 per share after tax.
Bank of America said that four of its five businesses report higher net income than a year ago. Investment Banking fees were up 4% to $1.4 billion, and Sales and Trading revenue was up 9%. The bank further said that credit quality continued to improve, with net charge-offs down 38% to $1.0 billion, while its net charge-off ratio of 0.46% was the lowest in a decade. These by and large appeared to be better than expected.
Bank of America further said that its tangible book value per share rose 4% to $14.13 per share, down 9 cents sequentially. Its stated book value per share was $21.01, versus $20.50 a year ago, down 13 cents sequentially.
The long and short of the matter is that the bank’s earnings report looks solid if you back out the charges from the massive settlement. Other key metrics were as follows:
- Common Equity Tier 1 Ratio under Basel 3 was 9.6%.
- Global excess liquidity was up $70 billion from a year ago to $429 billion.
- Non-interest expense decreased $19 million, or 1% from a year ago.
- Return on average allocated capital was 18.1% in the third quarter of 2014, down from 19.6% in the year-ago quarter.
- The company had 229,538 full-time employees.
Bank of America shares were up 0.7% on Tuesday at $16.62, ahead of earnings and on the heels of J.P. Morgan, Citigroup and Wells Fargo reports. Wednesday’s early indications had Bank of America shares up 1.6% at $16.79, against a 52-week range of $13.80 to $18.03. Analysts have a consensus price target of $18.09, according to Thomson Reuters.
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