Bank of America (BAC) reported a jump in first-quarter profit that missed some analysts' estimates as lower mortgage banking income slowed the company's turnaround. The shares dropped 3.3 percent in early New York trading.
Net income advanced to $2.62 billion, or 20 cents a share, from $653 million, or 3 cents, a year earlier, according to a statement today from the Charlotte, North Carolina-based company. Last year's first-quarter profit was reduced by $4.8 billion in pretax-accounting charges. Results missed the 23-cent estimate for adjusted earnings of 25 analysts surveyed by Bloomberg.
Chief Executive Officer Brian T. Moynihan, 53, has sold more than $60 billion in assets, settled more than $40 billion in mortgage claims and repaired the bank's balance sheet since taking over in 2010. He's now focused on trimming $8 billion in annual expenses and adding revenue after posting only three quarterly gains in net income since taking the top job.
"Lower mortgage banking income and lower net gains on the sales of debt securities" weighed on results, the bank said in the statement.
Bank of America is the last of the four biggest U.S. lenders to report results. JPMorgan Chase & Co., the largest U.S. bank, said earnings rose 33 percent to a record as credit quality improved. Wells Fargo & Co.'s record income increased 22 percent aided by cost cuts and Citigroup Inc. posted a 30 percent rise as results from fixed-income trading and investment banking beat estimates.
After leading the Dow Jones Industrial Average in 2012, Bank of America is trailing broad market benchmarks and most of its peers this year. The firm's 5.8 percent advance through yesterday to $12.28 a share compares with 13 percent for the Dow and 8.5 percent for the 24-company KBW Bank Index.
Moynihan has spent his tenure as CEO cleaning up financial, legal and regulatory quagmires inherited when he was promoted to the top job in 2010. Slimming the firm has meant letting Bank of America fall out of first place among its peers in terms of assets and workforce, and the asset sales put more pressure on revenue, which has been hurt by sluggish borrowing.
The most troubled assets include loans made by Countrywide Financial Corp., the mortgage company purchased in 2008, whose lax standards were blamed by lawmakers and regulators for fueling the housing bubble. The bank has been bombarded by legal claims tied to faulty mortgages and foreclosures, and some of the settlements negotiated by Moynihan's team still face court challenges.
To improve revenue, which slid 11 percent to $84.2 billion last year, Moynihan is setting new targets for regional managers to boost sales and pushing them to get existing customers to take more products, people with knowledge of the effort have said. Moynihan summoned more than 100 of the leaders to Chicago this month to discuss the initiative, said the people.
The CEO's plan coincides with Bank of America's marketing campaign introduced this month. Advertisements emphasize the ways people and corporations are assisted by the lender with the tagline "Life's better when we're connected." The firm's previous slogan was "Bank of Opportunity."
Efforts to repair the bank's reputation with investors and regulators got a boost last month when Moynihan won Federal Reserve approval to buy back as much as $5 billion in shares, the firm's first repurchase program since the 2008 financial crisis. Bank of America has about 10.8 billion shares outstanding, some created when the firm repaid U.S. bailouts in 2009, and buybacks may help drive up per-share earnings.
The lender also has been extinguishing expensive debt to lower interest payments.