Bank of America reported a slim quarterly profit Wednesday, a small success for the bank after doling out huge payments to settle claims that it misled investors about its takeover of Merrill Lynch during the financial crisis.
The bank reported $340 million in net income, a 95 percent drop from the $6.23 billion profit it posted in the period a year earlier. The results amounted to zero cents per diluted share, compared with 56 cents last year.
The bank’s revenue also dropped 28 percent, to $20.6 billion. The top and bottom line figures reinforced concerns that Bank of America, the nation’s second-largest by assets after JPMorgan Chase, had struggled to shed the legacy of the 2008 crisis.
Yet despite all the sharp declines, the results actually pointed to a small victory for the bank. The modest profit, padded by a $2.3 billion reduction in loan loss reserves, exceeded the estimates of analysts polled by Thomson Reuters, who had expected a loss of 6 cents a share. The bank also recorded improved investment banking income, which jumped 7 percent. Mortgage originations grew 18 percent, as interest rates remained at near-record lows. And the bank’s wealth management unit continued its strong gains.
The otherwise bleak third-quarter results were widely expected. The bank announced a $2.43 billion deal last month to settle shareholders’ accusations that it had provided false and misleading statements about the health of Merrill Lynch as the Wall Street investment bank racked up huge losses in late 2008 amid turmoil in the markets.
“Our strategy is taking hold even as we work through a challenging economy and continue to clean up legacy issues,” Brian T. Moynihan, the bank’s chief executive, said in a statement.
The results reflect the murky nuances of Bank of America’s balance sheet. As the bank continues to cope with legal problems – and broader revenue concerns – it has introduced a sprawling cost-cutting overhaul, known as “New BAC.” The effort prompted the bank to shed assets and slash jobs by the thousands. The bank’s full-time headcount, for example, declined 5 percent in the third quarter to 272,594 employees.
In the third quarter, the bank racked up a $1.6 billion litigation expense paying for part of the Merrill Lynch settlement and other lawsuits. It also incurred a $1.9 billion charge on the perceived improvement in its debt, an accounting-related cost that actually indicated greater public confidence in the stability of the bank. A final charge from a British tax expense cost the bank $800 million.
Bank of America noted that most of the losses were baked into estimates, skewing the bank’s true performance.