Bank of America profit rises 7.3%

New York

Bank of America Corp, the second-biggest US lender by assets, said third-quarter profit rose 7.3 per cent, beating analysts' estimates, as revenue from fixed-income trading was better than predicted and expenses fell.

Net income climbed to US$4.96 billion, or 41 cents a share, from US$4.62 billion, or 38 cents, a year earlier, the Charlotte, North Carolina-based company said Monday in a statement. Adjusted earnings per share excluding accounting adjustments were 42 cents, beating the 33-cent average estimate of analysts surveyed by Bloomberg.

Chief executive officer Brian Moynihan has been cutting costs for years while contending with persistently low interest rates. That's now paying off as Wall Street firms benefit from a mid-year rebound in fixed-income trading and the company moves beyond epic legal claims over mortgages that soured in the financial crisis. Earnings increased in all four of the bank's major business lines.

"We delivered strong results this quarter by staying true to our strategy of responsible growth and focusing on the quality of the relationships with our customers and clients," Mr Moynihan, 57, said in the statement.

Bank of America climbed 1.5 per cent to US$16.24 in early trading at 7.08am in New York. The stock had dropped 4.9 per cent this year through Friday, trailing the 2.5 per cent decline for the KBW Bank Index of 24 US lenders.

Revenue rose 3.1 per cent to US$21.6 billion. Expenses fell 3.3 per cent to US$13.5 billion, in line with analysts' estimates.

Fixed-income trading revenue rose 39 per cent to US$2.77 billion, exceeding the average analyst estimate of US$2.2 billion. Equity trading fell 17 per cent to US$960 million, missing the estimate of US$1.2 billion.

Investment-banking revenue, which includes dealmaking and underwriting securities, climbed 13 per cent to US$1.46 billion as debt and equity issuance increased, the bank said. That surpassed the average US$1.3 billion estimate from seven analysts surveyed by Bloomberg. Christian Meissner, global head of corporate and investment banking, said last month the third quarter was turning into a better period for deals after a summer lull, and underwriting activity in high-yield debt and leveraged finance was improving.

Consumer-banking profit rose 3.2 per cent to US$1.81 billion, as mortgage-banking income surged 45 per cent to US$589 million, topping the US$500 million estimate of Oppenheimer & Co analyst Chris Kotowski.

The business line the company calls "all other" posted a loss of US$182 million compared with profit of US$152 million a year earlier. Bank of America took a tax charge of about US$350 million for revaluing the company's deferred tax assets in the UK.

The company revised earnings for recent years on Oct 4 to reflect a change in the way it accounts for the value of certain securities held in its investment portfolio. Chief financial officer Paul Donofrio indicated in July that the new method, bringing the firm in line with Wall Street peers, may reduce swings within the bank's earnings. That month the company also made another change, dissolving a business segment created in 2011 to house delinquent mortgages.

JPMorgan Chase & Co kicked off the US financial industry's earnings season on Friday, beating analysts' profit estimates on a 48 per cent surge in fixed-income trading as investors speculated on government bonds. Citigroup Inc surpassed predictions, too, as fixed-income revenue jumped 35 per cent, helped by interest-rate and currencies trading. Wells Fargo & Co, contending with a scandal in its consumer business, also beat estimates.

Goldman Sachs Group Inc is set to announce quarterly results on Tuesday, with Morgan Stanley following on Wednesday. BLOOMBERG