The Banking and Strategy Initiative

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Bank Results Season: Bank of America finally exits the penny, quarter frame of mind! ($4 Bln Profits Q2 2013)

Photo of Bank of America ATM Machine by Brian ...

Photo of Bank of America ATM Machine by Brian Katt, Framingham Rest Stop, Massachusetts. (Photo credit: Wikipedia)

The Bank firstly returned over 80 MM equity shares to its Treasury buying back from investors and exiting $5 Bln in preference Capital even as the $4 Bln still spread to per share for just 32 cents per share. However, the bank could call a spade a spade and posted just $471 mln in litigation costs in the quarter, making up fo most of the rest from existing provisions. Credit losses were almost manageable at 41.21 Bln still a tad over its peers except at Citi Holdings. The Bank’s first successful capital return plan in 5 years, it still walks a fine line till 2015 as its internal models are reassessed for RWA coverage and BofA more than Goldman Sachs is on the block when the comprehensive risk measure ramps up the RWA score based capital leverage requirements of the bank based on the conservative canned Standardized version provided as a standardized approach in Basel ii, now used to get all banks under the same reporting roof for common equity leverage measures for the banks.  Preferred stock for America’s Heritage bank is down to $14 Bln stilla sizable scare for even a balance sheet with $2.125 Tln in assets and the Tangible Common is up near the roof at 6.98% ROA is up to 0.74%

Credit charge offs for the bank added yo the bottomline as chargeoffs receded below 1% at 0.94%. Net Interest Income for the Bank increased after a long gap to $10.55 Bln a $1 Bln improvement from the year ago quarter and on par with Q1 performance, taking the topline to $22.9 bln. Apart from an expense of $2.2 Bln in Q1 which has come down to $470 mln in Q2 Costs are down almost $2 Bln at $15.5 Bln (plus litigation = $16 Bln) Employee counts are down 18000 or 7% from a year ago to 257000 employees

NIMs for the bank stand out in the industry as they continue creeping up , now to 2.44% including all items

All said the Bank’s ROE is still a poor 6.55% and shares trade at around book Value Mortgage originations by the bank have improved to $25.3 Bln , a significant share of market at #3/#4 position (with US Bank) The bank as JP Morgan warns of the coming slowdown in the higher interest rate environment as volumes are down 5% from Q1

Consumer banking and Global wealth together yielded half the profits of the bank at $2.1 Bln Trading revenues of near $1 Bln took Global Banking and Global Markets to the remaining $1.2 Bln and $960 mln profit respectively

The Bank has booked Investment gains upward of $500 mln in the two quarters of 2013. And remember, the bank is still ceding its profits to litigation despite having already bled more than $20 Bln into provisions for the explicit purpose

Card income from the Bank of America retail network netted $1.1 Bln of the $1.45 Bln in cards income while consumer segment fees and charges were also $1 Bln of the total $1.8 Bln in service charges , $700 mln of which were delivered by the Global Banking segment ( not retail mortgages originated)

Mortgage Banking income was a positive $1.14 Bln with legacy only scratching production income of $1.411 Bln

Ave diluted shares could e expected to go below 10 Bln outstanding shares another 15-20% reduction from end of quarter outstanding at the bank

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