Bank of America posted a bigger-than-expected 70 percent jump in quarterly profit on Wednesday, helped by aggressive cost-cutting, as Chief Executive Brian Moynihan's turnaround efforts showed early signs of paying off.
Revenue rose 3.5 percent at the nation's second-largest bank, lagging increases of 11 percent at Citigroup and 14 percent at JPMorgan Chase. But Bank of America cut operating expenses 6 percent, while expenses grew at JPMorgan and Citigroup.
Bank of America unveiled an initiative in 2011 that aimed to save $8 billion a year, and by the fourth quarter of 2013 it hopes to have cut costs by $1.5 billion per quarter. Wednesday, the bank said it was on track to meet those goals and was ahead of schedule on cutting costs from bad mortgage assets. The bank's shares were up more than 3 percent in afternoon trading (Click here for the latest price).
"They've made excellent strides at cost control," said Joe Terril, president of Terril & Co, which manages $650 million and owns Bank of America shares.
"People are going to be surprised if we can get a little stronger economy, if Bank of America can get these legal and regulatory issues behind them, at the type of revenue and earnings that this bank can show," he added.
While most of the bank's businesses generated more income, the revenue picture was mixed. In consumer and small business banking, revenue fell by nearly 1 percent, while in consumer real estate services, revenue dropped 16 percent. In retail brokerage and asset management, investment banking and sales and trading, revenue rose.
Speaking to investors last quarter, Moynihan said that with the bank getting its expenses and bad assets under control, management would work more on boosting revenue and improving operations.
"As the other issues go away, this is what the team has to be focused on," he said.
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Bank of America paid about $2.5 billion for mortgage lender Countrywide Financial in 2008, at the height of the housing crisis, but since then it has paid and paid again for the company. Analysts estimate Bank of America has lost more than $40 billion from bad mortgages, litigation, and settlements with regulators linked to Countrywide mortgages.