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Originally published July 17, 2013 at 6:43 AM | Page modified July 17, 2013 at 1:38 PM

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BofA's earnings soar as bank slashes expenses

Bank of America said Wednesday that its second-quarter profits soared, welcome news at a bank where recent quarters have often been walloped by mortgage-related problems.

AP Business Writer

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NEW YORK —

Bank of America said Wednesday that its second-quarter profits soared, welcome news at a bank where recent quarters have often been walloped by mortgage-related problems.

The earnings growth came largely because the bank cut costs and set aside less money for potential troubled loans. While earnings popped 70 percent, revenue was up just 3 percent.

The results beat analysts' expectations and were enough to persuade investors that the bank is on the right path. Bank of America's stock jumped nearly 3 percent.

Bank of America, the country's second-biggest bank by assets, has for several years been slogging through problems left over from its 2008 acquisition of mortgage lender Countrywide Financial, a purchase that has brought lawsuits, regulatory investigations and quarterly losses. The bank has also been cutting jobs, expenses and entire business units to make itself more profitable and easier to manage.

In the second quarter, Bank of America slashed expenses about 6 percent compared with a year ago. It also cut about 18,300 jobs, or nearly 7 percent of its work force. The bank now has about 257,000 employees, down 11 percent from its peak of about 289,000 in 2011.

In a call with reporters, Chief Financial Officer Bruce Thompson noted that some of the job cuts were in the unit that services troubled mortgages, which is shrinking as the bank winds down those loans. He also said the bank had added jobs in the unit that makes new mortgages.

The bank has also been closing branches, trimming about 260 locations, or 5 percent, over the year. Thompson said the bank would sell more branches in locations "outside of our principal operating areas" and where the bank didn't have "a critical mass of consumers."

Results from the mortgage unit were mixed. The bank funded more than $25 billion in home mortgages, a leap of 40 percent compared to a year ago. But the overall mortgage business continued to lose money, dragged down by the troubled mortgages.

On Friday, JPMorgan Chase leaders warned that rising interest rates could decimate the demand for refinancing, which has fueled banks' current mortgage boom, by 30 or 40 percent. Thompson declined to make such a prediction and said the effect of rising interest rates was difficult to predict.

"While clearly rates can have an impact, I'm not sure we've seen quite the impact that some banks have discussed," he said.

Bank of America also benefited from lower litigation expenses, having already settled several lawsuits related to its mortgage unit earlier this year. Revenue was down in the consumer bank but up in wealth management and the investment bank.

Overall, Bank of America earned $3.6 billion in the quarter after payments to preferred shareholders, up from $2.1 billion a year ago.

Per share, that worked out to 32 cents, beating the 25 cents that analysts polled by FactSet had expected.

Revenue was $22.9 billion after stripping out one-time charges, up from $22.2 billion a year ago. That was also better than the $22.8 billion that analysts had expected.

The stock rose 39 cents to $14.31. It's up 23 percent this year.

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