Bank of America profit beats on consumer loan growth, lower expenses

BANK OF AMERICA Corp. reported quarterly profit above analyst expectations on Monday as the second-largest US lender cut expenses and benefited from growth in loans and deposits on the back of a strengthening economy.

Noninterest expense dropped 5% in the quarter from a year earlier as the bank trimmed headcount and worked on digitizing its retail operations to lower overhead.

Revenue rose in each of the bank’s segments with the exception of global banking, where lower investment banking fees dragged revenue down 2%.

During his near-decade long tenure, Chief Executive Brian Moynihan has focused on making the bank’s sprawling operations more efficient. Two years ago, he pledged to cut expenses to $53 billion by the end of this year, and the bank confirmed it is on track to meet that goal and plans to hold expenses at that level through 2020.

Banks have been broadly expected to report higher investment banking fees this year as lower US corporate tax rates and a friendlier regulatory environment encourage deal making.

Moynihan acknowledged on a call with analysts that the bank is underperforming peers when it comes to earning M&A advisory fees.

“The team knows they can do a better job, and they’re after it,” he said.

Total loans increased 2% in the quarter for Bank of America, led by growth in its consumer banking and wealth management businesses.

Total loan growth continued to be weighed by its runoff portfolio of consumer real estate loans, while yearover-year growth in Bank of America’s business segments was 5%.

Overall, Bank of America’s net income applicable to common shareholders rose 36.3% to $6.47 billion in the second quarter.

Excluding items, it earned 64 cents per share compared with the average expectation of 57 cents per share, according to Thomson Reuters I/B/E/S.

Net interest income rose 6% as the bank’s large stock of deposits and ratesensitive mortgage securities helped it take advantage of four interest rate hikes in the past year.

Revenue, net of interest expense, fell 1% to $22.76 billion. Revenue in the year earlier quarter included a $793 million pretax gain on the sale of the bank’s non-US consumer card business. Analysts had expected revenue of $22.29 billion. •