Bank of America, the second-biggest U.S. lender by assets, said third-quarter profit rose 7.3%, beating analysts' estimates, as revenue from fixed-income trading was better than predicted and expenses fell.
Net income climbed to $4.96 billion, or 41 cents a share, from $4.62 billion, or 38 cents, a year earlier, the Charlotte, N.C., company said Monday in a news release. 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," Moynihan, 57, said in the statement.
Bank of America climbed 1.5% to $16.24 in early trading at 7:08 a.m. in New York. The stock had dropped 4.9% this year through Friday, trailing the 2.5% decline for the KBW Bank Index of 24 U.S. lenders.
Revenue rose 3.1% to $21.6 billion. Expenses fell 3.3% to $13.5 billion, in line with analysts' estimates.
Fixed-income trading revenue rose 39% to $2.77 billion, exceeding the average analyst estimate of $2.2 billion. Equity trading fell 17% to $960 million, missing the estimate of $1.2 billion.
Investment-banking revenue, which includes dealmaking and underwriting securities, climbed 13% to $1.46 billion as debt and equity issuance increased, the bank said. That surpassed the average $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% to $1.81 billion, as mortgage-banking income surged 45% to $589 million, topping the $500 million estimate of Oppenheimer & Co. analyst Chris Kotowski.
The business line the company calls "all other" posted a loss of $182 million compared with profit of $152 million a year earlier. Bank of America took a tax charge of about $350 million for revaluing the company's deferred tax assets in the U.K.
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 kicked off the U.S. financial industry's earnings season Friday, beating analysts' profit estimates on a 48% surge in fixed-income trading as investors speculated on government bonds. Citigroup surpassed predictions, too, as fixed-income revenue jumped 35%, helped by interest-rate and currencies trading. Wells Fargo, contending with a scandal in its consumer business, also beat estimates.
Goldman Sachs Group is set to announce quarterly results on Tuesday, with Morgan Stanley following on Wednesday.