DealBook: Earnings Rise at Bank of America but Fall Short of Forecasts

Andrew Gombert/European Pressphoto AgencyA Bank of America branch in Manhattan.

Bank of America reported first-quarter earnings on Wednesday that fell well short of Wall Street’s expectations but were substantially higher than in the period a year earlier.

The bank made 20 cents a share in the first quarter, compared with 3 cents in the year-ago period. Analysts were expecting a profit of 23 cents a share. Bank of America, the nation’s second-largest bank when measured by assets, had revenue of $23.5 billion in the first quarter.

Since the financial crisis, Bank of America’s performance has been hurt by large mortgage-related losses, but in recent months investors have been betting the bank would regain its footing. Its shares have risen nearly 40 percent in the last 12 months. And earlier this year, regulators approved the bank’s plan to buy back stock, a clear sign they felt the lender was on firmer ground.

In a statement, Brian T. Moynihan, Bank of America’s chief executive, said, “Our strategy of connecting our customers to all we can do for them is working.”

The question is whether the latest earnings will add to the recent optimism surrounding the bank, which lends to individuals and companies and has a large Wall Street presence through its Merrill Lynch unit.

Other large banks have reported earnings that exceeded analysts’ estimates this quarter, so Bank of America’s failure to do so may unnerve some investors. That said, some of the weakness in the quarter resulted from the types of losses that could cause less pain in the future, like litigation expenses relating to bad mortgages.

The bank said it had made headway in cutting expenses, something investors are watching closely. As banks struggle to increase revenue, they can improve earnings by reducing costs.

“There were many examples of progress this quarter,” said its chief financial officer, Bruce R. Thompson. “We reduced noninterest expense by nearly $1 billion year-over-year, and credit costs continued to decline.”

Notably, the bank’s earnings were lower in this year’s first quarter, after excluding accounting charges related to the bank’s own debt, a measure investors often ignore. Absent those charges in the first quarter of 2012, the bank made 31 cents a share.

This year’s first quarter contained very little effect from such charges, so the 20 cents a share the bank reported Wednesday should be compared with the 31 cents a share from the period a year earlier.

Article source: http://dealbook.nytimes.com/2013/04/17/bank-of-america-earnings-rise-but-fall-short-of-forecasts/?partner=rss&emc=rss