* Sales and trading revenue more than doubles
* Loan loss reserve, expenses decline
* Accounting charges hurt bottom line
* Shares slightly higher in morning trading
By Rick Rothacker
April 19 Bank of America Corp posted a
better-than-expected first-quarter earnings on Thursday as the
No. 2 U.S. bank set aside less money for loan losses and capital
markets activity rebounded.
The bank, like rivals including JPMorgan Chase & Co
and Citigroup Inc, benefited from signs of strength in the
U.S. economy and more activity in the capital markets as fears
about the European debt crisis eased.
The results showed Bank of America making further progress
in recovering from mortgage-related losses it racked up during
the financial crisis. Executives said the bank was building
capital faster than expected and raised their outlook for
year-end capital measures required under new international
Bank of America said its first-quarter provision for
expected losses from bad loans fell to the lowest level since
the third quarter of 2007. Sales and trading revenue, excluding
an accounting charge, was the highest since the 2008 acquisition
of Merrill Lynch.
"In general, it shows nice improvement across the board,"
said Joe Terril, president of Terril & Co. "I think the thing I
am most pleased with just at first glance is continued
improvement in the loan portfolio."
Bank of America shares rose as high as $9.16 in early
trading on the New York Stock Exchange but then fell back. They
were up 5 cents to $8.97 at mid-morning.
The shares are up 60 percent this year after falling 58
percent in 2011. The bank passed the Federal Reserve's latest
stress test in March, shifting investor concerns from its
capital needs to its ability to increase earnings in a time of
low interest rates and increased regulation.
Separately on Thursday, Morgan Stanley also reported
better-than-expected results, helped by strong trading revenue.
Bank of America's first-quarter net income was $653 million,
or 3 cents a share, down from $2.05 billion, or 17 cents per
share, a year earlier.
Revenue declined to $22.3 billion from $26.9 billion.
The bank reported charges of $4.8 billion related to changes
in the value of its debt, partially offset by gains of $ 2.8
billion f rom equity investments and debt-related transactions.
Excluding debt valuation adjustments, earnings were 31 cents
Analysts' average estimate was 12 cents per share, according
to Thomson Reuters I/B/E/S. The bank said analysts typically do
not include debt valuation adjustments in their estimates.
The Charlotte, North Carolina-based bank took a loan-loss
provision of $2.4 billion, compared with $3.8 billion a year
In its capital markets operations, Bank of America reported
sales and trading revenue of $3.8 billion, up from $1.5 billion
in the fourth quarter but down from $4.6 billion a year ago.
The bank's Tier 1 common equity ratio -- comparing its core
equity capital to its risk-weighted assets -- rose to 10.78
percent from 9.68 percent in the fourth quarter as it issued
shares to employees, shed assets and accumulated earnings.
Chief Financial Officer Bruce Thompson said in a conference
call with analysts that the bank expects to have a Tier 1 common
equity ratio of more than 7.5 percent by year end under
so-called Basel III rules, up from its previous estimate of 7.25
percent to 7.5 percent.
With revenue harder to come by, Bank of America CEO Brian
Moynihan is looking to cut costs to boost profits. The bank last
year launched a cost-cutting program called Project New BAC that
is expected to eliminate 30,000 jobs in consumer and technology
areas over the next few years and reduce annual expenses by $5
In the conference call with analysts, Thompson said the bank
expects to wrap up plans for the second phase of New BAC in May.
That segment - focusing on capital markets, wealth management
and commercial banking - is expected to produce a smaller
reduction in expenses and jobs because these businesses are more
efficient and have fewer employees.
First-quarter expenses fell 5.6 percent to $19.1 billion.
"We will continue to streamline our company," Moynihan said
in the call.