Bank of America profit jumps on cost-cutting; shares climb

Wed Jul 17, 2013 2:23pm EDT
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By Peter Rudegeair

(Reuters) - Bank of America Corp (BAC.N: Quote) posted a bigger-than-expected 70 percent jump in quarterly profit on Wednesday, helped by aggressive cost-cutting, as Chief Executive Brian Moynihan's turnaround efforts showed early signs of paying off.

Revenue rose just 3.5 percent, lagging increases of 11 percent at Citigroup Inc (C.N: Quote) and 14 percent at JPMorgan Chase & Co (JPM.N: Quote). But Bank of America cut operating expenses 6 percent, while expenses grew at JPMorgan and Citigroup.

Bank of America unveiled an initiative in 2011 aimed at saving $8 billion a year, and by the 2013 fourth quarter it hopes to have cut costs by $1.5 billion per quarter. On Wednesday, the bank said it was on track to meet those goals and was ahead of schedule on cutting costs from bad mortgage assets.

The bank's shares were up 3.3 percent to $14.38 in afternoon trading, touching their highest levels since March 2011.

"They've made excellent strides at cost control," said Joe Terril, president of Terril & Co, which manages $650 million and owns Bank of America shares.

"People are going to be surprised if we can get a little stronger economy, if Bank of America can get these legal and regulatory issues behind them, at the type of revenue and earnings that this bank can show," he added.

While most of the bank's businesses generated more income, the revenue picture was mixed. In consumer and small business banking, revenue fell by nearly 1 percent, while in consumer real estate services, revenue dropped 16 percent. In retail brokerage and asset management, investment banking and sales and trading, revenue rose.

In April, Moynihan said that with the bank getting expenses and bad assets under control, management would work more on boosting revenue and improving operations. "As the other issues go away, this is what the team has to be focused on," he said.   Continued...

The logo of the Bank of America is pictured atop the Bank of America building in downtown Los Angeles November 17, 2011. REUTERS/Fred Prouser