Bank of America profit rises, but says growth a struggle
Bank of America reported higher profits on better performance in consumer banking and lower costs, but the bank acknowledged that it is struggling to increase revenue despite an improving United States economy.
BofA said Tuesday it earned a profit of US$3.01 billion, or 28 cents per share, after payment of dividends to preferred shareholders. That's an improvement of nearly 10 per cent over the US$2.74 billion, or 25 cents per share the bank earned during the same period last year. The results beat expectations. Analysts surveyed by Factset expected earnings of 27 cents per share, on average.
For the year, Bank of America earned US$14.41 billion, up from US$3.38 billion a year earlier.
BofA CEO Brian Moynihan said in a prepared statement that results for the year, which were the highest earnings in a decade for the bank, were the result of "doing more business with each customer and client".
But in a conference call with investors, the bank's Chief Financial Officer Paul Donofrio said that growing company revenue has been difficult. Bank of America is more heavily exposed to low interest rates than other big banks because it depends so heavily on its large retail banking business, and less so on trading.
"Although the US economy is improving slowly, revenue growth remains challenging," he said.
Revenue at BofA's consumer banking business, by far its largest business, rose by just 0.4 per cent in the quarter to US$7.79 billion. The division was able to boost profits, though, by nine per cent. It reported net income of US$1.8 billion, versus US$1.65 billion a year earlier, as deposits and loans grew in the quarter.
The bank's trading division also did well compared with last year, despite choppy and difficult markets last quarter. The division, called "global markets", had a profit of US$185 million in the quarter versus a loss of US$75 million a year earlier. Revenues for the division were US$3.33 billion in the quarter, up from US$3.01 billion.
"Solid result in a tough quarter," said Keith Horowitz, an analyst with Citigroup, in a note to investors.
The bank's cost-cutting efforts were the result in part of a reduction of employees by more than 10,000 people, or five per cent, to 213,280 from 223,715 a year ago, mostly from its Legacy Assets and Servicing division. It also closed 129 branches, leaving the bank with 4,726. It was the fourth year in a row that BofA has cut its number of branches.