Bank of America profit rises 7.3% on cost cuts, bond trading

Bank of America reported a 7.3 per cent rise in profits in the third quarter.
Bank of America reported a 7.3 per cent rise in profits in the third quarter.PHOTO: AFP

NEW YORK (BLOOMBERG) - Bank of America, the second-biggest US lender by assets, said third-quarter profit rose 7.3 per cent as expenses fell and revenue from fixed-income trading was better than analysts predicted.

Net income climbed to US$4.96 billion (S$6.89 billion), or 41 cents a share, from US$4.62 billion, or 38 cents, a year earlier, the company said Monday in a statement.

Chief Executive Officer Brian Moynihan has been expanding cost-cutting efforts for years while contending with persistently low interest rates. That's now paying off as Wall Street firms benefit from a mid-year rebound in fixed-income trading and the company moves beyond epic legal claims over mortgages that soured in the financial crisis.

"We delivered strong results this quarter by staying true to our strategy of responsible growth and focusing on the quality of the relationships with our customers and clients," Mr Moynihan, 57, said in the statement.

Fixed-income trading revenue rose 39 per cent to US$2.77 billion, exceeding the average analyst estimate of US$2.2 billion. Equity trading fell 17 per cent to US$960 million, missing the estimate of US$1.2 billion.

The bank revised earnings for recent years on Oct. 4 to reflect a change in the way it accounts for the value of certain securities held in its investment portfolio. Chief Financial Officer Paul Donofrio indicated in July that the new method, bringing the firm in line with Wall Street peers, may reduce swings within the bank's earnings. That month the company also made another change, dissolving a business segment created in 2011 to house delinquent mortgages.

JPMorgan Chase kicked off the US financial industry's earnings season Friday, beating analysts' profit estimates on a 48 per cent surge in fixed-income trading as investors speculated on government bonds. Citigroup surpassed predictions too as fixed-income revenue jumped 35 percent, helped by interest-rate and currencies trading. Wells Fargo, contending with a scandal in its consumer business, also reported a beat.

Goldman Sachs Group Inc. is set to announce quarterly results on Tuesday, with Morgan Stanley following on Wednesday.