BofA Earnings Top Estimates As Bad Loans Ease


Bank of America Corp., the largest United States lender, posted profit that beat estimates of most analysts as pressure from overdue loans abated.

The stock dropped 4.4 per cent in early trading as the company reported lower revenue and said stock buybacks are not imminent.

According to Bloomberg, Second-quarter net income dropped to $3.12bn, or 28 cents a share before preferred dividends, from $3.22bn, or 33 cents, in the same period a year earlier, according to a statement on Friday from the Charlotte, North Carolina-based bank.

The average estimate of 24 analysts surveyed by Bloomberg was 23 cents, adjusted for one-time items.

Revenue declined 11 per cent to $29.15bn from a year earlier. Chief Executive Officer, Mr. Brian T. Moynihan, 50, is rebuilding the bank‘s image with consumers, Congress and regulators as he tries to reverse losses from credit cards and home loans.

A decline in the US jobless rate to 9.7 per cent helped borrowers keep up with payments, a boon to Bank of America since it is the nation‘s largest consumer lender. “We‘re in a period of muddling along with this economy and it going to take a few more quarters for you to see sustained activity,” Moynihan said in an interview on Friday on Bloomberg TV.

“We‘re sort of in a state of moving through the muck, and yet we‘re moving in the right direction.”

Bank of America dropped 67 cents to $14.72 at 7:49 a.m. in New York. While JPMorgan Chase & Co. has been repurchasing shares, Moynihan said it will be several quarters before Bank of America will do any buybacks.

The bank earmarked $8.1bn for credit losses, a 17 per cent cut from 2010‘s first quarter. JPMorgan Chase CEO Jamie Dimon discounted his bank‘s $1.5bn gain from cutting loan- loss reserves yesterday, saying it doesn‘t represent “normal ongoing earnings.”

Profit in Bank of America‘s second quarter of 2009 included a gain from equity investments, mainly proceeds from the sale of part of the lender‘s stake in China Construction Bank. Bank of America slid 20 per cent during the second quarter on concern that another recession was imminent.

The shares then rebounded 7.1 per cent since June 30 to close at $15.39 on Friday on the New York Stock Exchange. JPMorgan Chase, the company‘s biggest rival, gained 11 per cent over the same span, and yesterday the New York-based bank reported a 76 per cent increase in second-quarter profit. Bank of America ranks first in the U.S. by deposits and assets, and second among credit-card and housing lenders.

While the acquisition of Merrill Lynch last year bolstered the company‘s corporate and investment-banking operations, about half of 2009 revenue was still tied to retail banking and consumer loans.

Moynihan has overhauled risk management and simplified statements, policies and overdraft fees that he said had bred ill will and stuck some customers with a “$35 cup of coffee.” At the same time, banks are trying to make up for costs imposed by new regulations in the financial industry overhaul passed by the U.S. Senate yesterday. The new rules may cut Bank of America‘s annual revenue by $1.9bn, according to DBRS Inc., the Toronto-based ratings firm. The company is introducing a checking account on Aug. 6 that imposes an $8.95 monthly fee if the customer wants to use a teller or receive a monthly statement through the mail. Moynihan wants to change Bank of America‘s image from “one of the banks that American retail banking customers most love to hate and most desire to leave,” analyst Nancy Bush of NAB Research LLC said in a July 6 report. “We know that this issue has the highest priority with bank management and its board.” IMF raises global economic growth forecast     The International Monetary Fund (IMF) has raised its forecast for global growth this year, from 4.2 per cent to 4.6 per cent, according to the British Broadcasting Corporation, reported on Friday.It said the world economy grew strongly in the first part of this year, mainly thanks to robust growth in Asia. However, the United Kingdom was almost unique in having its 2010 growth forecast revised slightly down, while its 2011 forecast was cut by the IMF from 2.5 per cent to 2.1 per cent.The IMF also warned risks had increased and there had been a setback in progress towards financial stability.Developed economies have maintained a modest, but steady recovery in the year to date, the supranational agency said. Concerns over the sustainability of government finances in the developed world especially Greece and others in Europe, were the major threat to global recovery the IMF argued.It said governments should focus on improving their finances, but warned them not to make cutbacks too rapidly.