Bank of America Profit Climbs, Despite Trading Slowdown -- Update

By Rachel Louise Ensign 

Bank of America Corp. said its third-quarter profit rose to $5.59 billion as the bank inched closer to meeting its profitability goals.

Quarterly profit at the second-largest U.S. bank by assets rose 13% from $4.96 billion a year earlier. Per-share earnings of 48 cents were up from a year earlier and topped analyst expectations of 45 cents a share.

Third-quarter revenue was $21.84 billion, up from $21.64 billion a year earlier. On an adjusted basis, revenue was $22.08 billion, up from $21.86 billion a year earlier. Analysts had expected $21.98 billion.

Bank of America's quarterly return on equity was 8.1%, up from the prior quarter, but below the bank's 10% theoretical cost of capital.

After an initial lift from last November's election, Bank of America shares climbed 4.6% in the past month as long-term bond yields have risen, a metric that is expected to benefit the bank's lending profits.

Bank of America also got an important vote of confidence in August when Warren Buffett's Berkshire Hathaway Inc. officially became the bank's largest shareholder, a result of an investment Berkshire initially made in 2011. Since then, Mr. Buffett has publicly praised Bank of America chief Brian Moynihan and said his firm plans to be a shareholder for a long time.

Bank of America's large base of U.S. deposits and rate-sensitive mortgage securities makes it particularly poised to benefit from an uptick in interest rates. The bank's net interest income rose to $11.16 billion, though it started to pay slightly higher rates to depositors in the quarter. The rate the bank paid on U.S. interest-bearing deposits was 0.24%, compared with a rock-bottom 0.11% in the prior quarter.

The Charlotte, N.C.-based lender faced some headwinds in the third quarter. The bank and other major lenders warned that trading revenue would be under pressure. And while long-term interest-rates have risen recently, they were low for much of the quarter.

Trading revenue at Bank of America, excluding an accounting adjustment, fell 15% to $3.15 billion from $3.73 billion in last year's third quarter.

Quarterly expenses edged down 2.5% to $13.14 billion, from $13.48 billion a year ago. Mr. Moynihan has made cost cutting a key tenet of his business strategy and last year promised to cut $5 billion in annual expenses by 2018.

Shares rose 0.5% premarket.

Write to Rachel Louise Ensign at [e-mail]

(END) Dow Jones Newswires

October 13, 2017 07:42 ET (11:42 GMT)

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