Bank of America said Wednesday that its second-quarter profit more than doubled from a year ago, easily surpassing analysts' expectations.
The bank earned $5.3 billion in the quarter, up from $2.3 billion in the quarter a year ago. On an earnings-per-share basis, the bank earned 45 cents a share in the second quarter, up from 19 cents a share a year ago. Those results far exceeded analysts' expectations of 36 cents at a time when many critics had begun questioning the bank's stagnant share price and recent history of lackluster performance.
Its revenue also increased 2 percent, to $22.3 billion from a year ago. Analysts had been expecting revenue of $21.3 billion, according to a survey by Thomson Reuters.
Plagued for years by litigation costs related to its handling of mortgages, the bank reported a broad decline in expenses. Excluding litigation costs in the second quarter, Bank of America said its expenses declined 6 percent from a year ago, while the costs of servicing its troubled mortgage portfolio dropped 37 percent.
Investors have been clamoring to see the bank make more progress in cutting expenses in recent quarters to offset the effects of low interest rates.
After years of working to bring down expenses, particularly in its legacy mortgage unit, bank executives said the effort was finally paying off.
"We think it was a giant step forward this quarter for the company," Bruce Thompson, Bank of America's chief financial officer, said in a conference call with reporters Wednesday morning.
The bank's chief executive, Brian Moynihan, said in a statement: "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."
The bank was also helped by an increase in long-term interest rates in the quarter, which bolstered the value of its holdings of Treasury and other debt securities. Bank of America uses a mark-to-market valuation for its debt securities holdings, which can cause their value to swing more immediately than those of other big banks.
Mark-to-market is a term used to describe a system of valuing assets by the most recent market price.
The increase in long-term interest rates generated $669 million, or 4 cents a share, in income in the second quarter. A year ago, the effect of rates at the time on the bank's debt portfolio led to negative adjustments of $175 million.
The move in the bank's debt securities holding foreshadows the boon that Bank of America and other large banks could receive if the Federal Reserve raises rates in the next few months. Many bank investors have been patiently waiting out the struggles at lenders such as Bank of America in hopes that the companies' share prices would increase as interest rates rise from historic lows.
Business on 07/16/2015