Bank of America Posts Profit on Merrill Lynch Revenue (Update3)
By David Mildenberg and Nikolaj Gammeltoft
April 16 (Bloomberg) -- Bank of America Corp., the largest U.S. lender, posted its first profit in three quarters as the company reaped gains from Merrill Lynch & Co.’s investment banking and stanched losses on credit cards.
First-quarter net income was $3.18 billion, or 28 cents a share, compared with $4.25 billion, or 44 cents, in the same period a year earlier, according to a statement today from the Charlotte, North Carolina-based bank. That beat the average estimate of 23 analysts surveyed by Bloomberg of 10 cents.
Revenue from Merrill Lynch’s corporate customers and retail investors is helping Chief Executive Officer Brian T. Moynihan keep the bank profitable as he tries to turn around consumer banking. Credit cards swung to a profit while losses on home lending continued. Merrill Lynch, whose takeover last year triggered a federal bailout and regulatory probes, drove sales and trading revenue to a record $7 billion. “It was a mega-huge trading quarter,” even better than JPMorgan Chase & Co., said Nancy Bush, an independent bank analyst. “Bank of America and JPMorgan, at least in the capital markets, have overcome the disruption. The financial crisis is over for these companies.”
Benefits from Bank of America’s Merrill Lynch purchase are occurring at least three quarters earlier than expected, Bush said. She has a “hold” recommendation on the stock.
Repair Jobs
Moynihan, 50, has said he’s focused on curtailing bad loans and simplifying consumer accounts and fees. The provision for credit losses dropped by $3.6 billion, according to the bank. He’s also trying to repair relations with Congress and regulators, which frayed during the months before the December retirement of his predecessor, Kenneth D. Lewis. New consumer banking regulations will trim Bank of America’s annual revenue from service charges to about $2 billion per quarter starting in the fourth quarter this year, the bank said. That revenue has averaged more than $2.6 billion per quarter over the past year, the bank said.
“We’ve seen the view of commercial companies in America get more confident,” Moynihan said in a CNBC interview. “I expect we’ll see better loan demand, but right now it’s not very strong.”
Bank of America ranks first in the U.S. by deposits and assets, and second among credit-card lenders. Overdue card loans fell in March to the lowest in more than a year, signaling that write-offs may decline from 2009’s record.
Card Services
The bank’s card services business swung to a $952 million profit from a $1.75 billion loss. The provision for credit costs on unpaid card debts dropped by more than half to $3.54 billion. Home loans and insurance reported a $2.07 billion loss as fewer borrowers refinanced their homes and defaults increased. It was the only one of Bank of America’s six operating units to report a loss during the quarter.
At Merrill Lynch, the company has sought to head off defections of top producers and rehired executives who left. The bank has said it’s spurring growth outside the U.S. by adding more than a dozen corporate bankers in Hong Kong, London and Singapore this year and more staff in emerging-market nations.
Revenue from fixed-income, currency and commodity trading climbed 16 percent to $5.52 billion, the most since the bank acquired Merrill Lynch last year. The segment’s revenue exceeded JPMorgan’s $5.46 billion in fixed-income revenue for the quarter, which was a record for that bank.
Equities sales and trading revenue, at $1.53 billion, was also the highest since the takeover of Merrill Lynch and also beat JPMorgan.
Banks Report
Bank of America stock reached its highest price yesterday since the Merrill Lynch purchase, and fell 16 cents to $19.32 at 9:36 a.m. in New York Stock Exchange composite trading. The shares soared sixfold from March 2009 when analysts were speculating about nationalization.
JPMorgan, the lender’s biggest rival, reported earlier this week that first-quarter profit topped analysts’ estimates on record fixed-income trading and declining provisions for credit losses. Citigroup Inc. and Wells Fargo & Co. report results next week.
“The mega-cap banks will continue to offer very positive results,” said Jack Ablin, chief investment officer at Chicago- based Harris Private Bank, who oversees $55 billion. “Most of Bank of America’s business is skewed to the consumer and because consumer balance sheets are improving they should deliver good results.”
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