Bank of America’s profit climbs as mortgage woes lift

BANK of America, the secondlargest US lender, said yesterday third-quarter profit had climbed as the firm curbed expenses and more borrowers paid on time.

Net income advanced to $2.5bn, or 20c a diluted share, from $340m a year earlier when per-share results were breakeven, the Charlotte, North Carolina-based bank said. The average estimate of 24 analysts surveyed by Bloomberg was 21c.

CEO Brian Moynihan has said the “lion’s share” of mortgage costs are behind his bank after booking more than $45bn tied to his predecessor’s 2008 takeover of Countrywide Financial Corporation. The bank will trim $8bn in annual operating costs by the end of 2014 and $10bn from troubled loans a year later, Mr Moynihan has said.

“They’ve done a fairly good job of convincing the market that those cost savings are going to occur,” said Jonathan Finger, whose investment company, Finger Interests, owns 900,000 Bank of America shares. “Their results have gotten cleaner, though a lot of folks still expect some charges going forward.”

Bank of America told investors last month the quarter’s results would be helped by the sale of about 2-billion shares in China Construction Bank, ending an eight-year investment in the Beijing-based lender.

Mr Moynihan, a lawyer, may have to deal with another round of legal woes tied to mortgages. Bank of America was sued by the US for

Their results have gotten cleaner, though folks still expect some charges

allegedly hiding risk from investors in an $850m securitisation in 2008, according to a complaint filed in August.

Regulators were also scrutinising Merrill Lynch sales of collateralised debt obligations, the lender said.

Banks are cutting home-lending staff as higher interest rates discourage refinancing. Bank of America will eliminate 2,100 jobs and close 16 mortgage offices, two people with knowledge of the plans said last month, following reductions announced by bigger mortgage rivals Wells Fargo and JPMorgan Chase.

Bank of America shares rose 7.3% during the third quarter, the best showing among the four biggest commercial US lenders. The bank closed at $14.24 on Tuesday for a 23% gain this year, trailing the 24-company KBW bank index by less than one percentage point.

JPMorgan posted a thirdquarter loss of $380m after taking a $7.2bn charge to cover litigation costs and regulatory probes.

Wells Fargo, the biggest mortgage lender, said profit rose 13% to a record $5.58bn as the San Francisco-based firm released reserves for credit losses. Citigroup profit, which rose to $3.23bn from $468m, missed some analysts’ estimates as bond trading and mortgage lending slumped at the firm.