Bank of America Posts Profit; Shares Move Lower
Bank of America reported a $340 million profit that was better than expected, but revenue missed analysts' expectations on Wednesday.
After the earnings announcement, the company's shares rose about 0.8 percent in trading before the opening bell. (Click here to get the latest quotes for Bank of America.)
On a per-share basis, the company posted third-quarter earnings that were essentially flat, down from 56 cents a share in the year-earlier period.
Revenue decreased to $20.4 billion from $28.45 billion a year ago.
Analysts had expected the company to report a quarterly loss excluding items of 7 cents a share on $21.89 billion in revenue, according to a consensus estimate from Thomson Reuters.
"Our strategy is taking hold even as we work through a challenging economy and continue to clean up legacy issues, " CEO Brian Moynihan said in a statement.
A legal settlement and other previously disclosed charges dented its bottom line.
Bank of America last month agreed to pay $2.4 billion to settle claims that it hid crucial information from shareholders when it bought investment bank Merrill Lynch at the height of the financial crisis. The bank denied the allegations.
Bank of America previously said the settlement, a UK tax charge and an accounting charge related to the value of its debt would reduce earnings by 28 cents per share.
The results show that Chief Executive Brian Moynihan still has a lot of work to do to turn around a company haunted by acquisitions forged during the financial crisis.
To boost profits, the bank last year launched a broad cost-cutting program that aims to eliminate $8 billion in annual expenses and 30, 000 jobs.
In its earnings presentation, the company provided more clarity on possible losses from repurchases of soured loans that it sold to investors during the housing boom. It said it could lose up to $6 billion above its current reserves on claims from Fannie Mae and Freddie Mac as well as private investors. It previously said its losses beyond reserves could be up to $5 billion for private investors only.
In a conference call with reporters, Chief Financial Officer Bruce Thompson said the bank still has disagreements with Fannie Mae over claims and has not reached any settlement with the government-controlled mortgage finance company.
BofA had $16.3 billion in reserves for repurchase claims at the end of the third quarter.
Bank of America is the fifth major bank to report earnings in what is forecast to be one of the worst quarterly seasons for companies since late 2009.
So far, Goldman Sachs , Citigroup and JPMorgan Chase have all beaten earnings and revenue forecasts, but Wells Fargo' s light revenue disappointed investors.