July 17, 2013 / 1:26 PM / 4 years ago

UPDATE 2-Bank of America profit jumps on equity trading, cost cuts

By Peter Rudegeair

July 17 (Reuters) - Bank of America Corp posted a 70 percent jump in quarterly profit, helped by higher stock trading revenue and lower expenses as Chief Executive Brian Moynihan’s efforts at a turnaround showed early signs of paying off.

Business was stronger in a number of areas for the second-biggest U.S. bank by assets. Retail brokerage and asset management income rose 38 percent, while trading income, excluding an accounting adjustment, jumped 57 percent, it said on Wednesday. Retail and small business banking income gained 15 percent.

The bank’s shares added 1.3 percent to $14.10 before the bell.

Across the bank, revenue was up 3.5 percent and operating expenses fell 6 percent. Moynihan has been trying to boost revenue by selling more products to customers.

Bank of America unveiled an initiative in 2011 that aimed to save $8 billion a year, and has set a goal of achieving $1.5 billion in savings per quarter by the fourth quarter of 2013.

Net income for common shareholders rose to $3.57 billion, or 32 cents per share, from $2.10 billion, or 19 cents per share, a year earlier. Revenue, net of interest expense, rose to $22.73 billion from $21.97 billion.

Analysts, on average, expected earnings of 25 cents per share, according to Thomson Reuters I/B/E/S.

JPMorgan Chase & Co and Citigroup Inc posted bigger gains in revenue than Bank of America, but their net income did not rise as much because of less aggressive cost-cutting.

Bank of America’s operating expenses fell to $16.02 billion from $17.05 billion in the same quarter last year.

Sales and trading revenue rose to $4.15 billion, excluding an accounting adjustment, from $3.73 billion last year. Income in its global markets unit soared to $935 million from $595 million, excluding the accounting adjustment that allowed the bank to book gains and losses based on changes in the value of its own debt.

The sales and trading results were driven by equities sales and trading, where revenue, excluding the adjustment, rose 53 percent to $1.2 billion.

But fixed income, currency, and commodities sales and trading revenue fell by $296 million to $2.3 billion. Most other banks posted gains in bond trading, even as yields rose during the quarter. But changes in bond yields hurt Bank of America’s mortgage-backed securities business.

WIDENING MARGINS

Revenue in the global banking division rose 5.9 percent to $4.14 billion, driven by a 24 percent increase in investment banking fees.

Revenue in consumer and business banking was little changed at $7.43 billion, while global wealth and investment management business increased 10 percent to $4.50 billion on higher asset management fees.

Bank of America’s shares have risen nearly 20 percent this year through Tuesday, below the 25 percent increase in the KBW bank index.

Net interest margin, a measure of the profitability of its loans, rose to 2.44 percent from 2.21 percent a year earlier.

Rising interest rates should alleviate pressure on margins, but that trend will take time to have a material impact on interest margins.

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