Bank of America said third-quarter profit rebounded as the firm curbed legal expenses and more borrowers paid on time.
Net income advanced to $2.5 billion, or 20 cents a diluted share, from $340 million a year earlier when per-share results were break-even, the Charlotte, North Carolina-based bank said today in a statement. The average estimate of 24 analysts surveyed by Bloomberg was 21 cents.
Chief Executive Officer Brian T. Moynihan, 54, has said the "lion's share" of costs tied to disputed mortgages are behind his bank after booking more than $45 billion tied to his predecessor's 2008 takeover of Countrywide Financial Corp. The bank will trim $8 billion in annual operating costs by the end of 2014 and $10 billion from troubled loans a year later, Moynihan has said.
"They've done a fairly good job of convincing the market that those cost savings are going to occur," said Jonathan Finger, whose family-owned investment company, Finger Interests Ltd., owns 900,000 Bank of America shares. "Their results have gotten cleaner, though a lot of folks still expect some charges going forward."
Total expenses during the quarter slid 6.6 percent from a year earlier to $16.4 billion because of lower costs in the division servicing troubled loans, staff reductions and litigation costs that fell by 31 percent to $1.1 billion.
Capital levels improved, with the bank saying it expects to exceed new U.S. regulatory minimums -- known as the supplementary leverage ratio -- for the parent company and its two primary banking units.
Revenue rose 5.4 percent to $21.5 billion. Excluding certain accounting adjustments, revenue slid to $22.2 billion from $22.5 billion.
"We saw good loan growth, improved credit quality and record deposit balances," Moynihan said in the statement.
Income at the global banking unit, overseen by co-Chief Operating Officer Thomas K. Montag, slipped 1.5 percent to $1.13 billion on higher provisions for credit losses.
Global markets, the bank's trading operations, posted a 39 percent drop in profit to $531 million excluding adjustments tied to credit and tax rate changes. Revenue in the division fell 5 percent to $3.7 billion on lower results across fixed- income units.
Revenue in the firm's fixed-income, currency and commodities sales and trading fell because of "lower market volumes arising from concerns around monetary policy as well as political uncertainty domestically and abroad," the lender said. David Sobotka became sole head of the unit last month after former co-head Gerhard Seebacher retired, according to a memo from Montag.
The bank told investors last month the quarter's results would be helped by the sale of about 2 billion shares in China Construction Bank Corp., ending an eight-year investment in the Beijing-based lender.
Moynihan's performance won praise from Warren Buffett, the chairman of Berkshire Hathaway Inc., who cited the decline in bad loans. Buffett invested $5 billion in the bank in 2011.
"I don't think anybody expected charge-offs a few years ago to be as low as they are now," Buffett said today on CNBC. "So Brian's done a great job."
Moynihan, a lawyer who served as general counsel, may have to deal with another round of legal woes tied to mortgages. Bank of America was sued by the U.S. for allegedly hiding risk from investors in an $850 million securitization in 2008, according to a complaint filed in August.
Regulators are also scrutinizing Merrill Lynch sales of collateralized debt obligations, the lender said.
Bank of America cut more than 9,200 jobs during the third quarter, or about 3.6 percent of the workforce, to bring the number of full-time employees down to 247,943, according to the bank's report today.
Banks are cutting home-lending staff as higher interest rates discourage refinancing. Bank of America will eliminate 2,100 jobs and close 16 mortgage offices, two people with knowledge of the plans said last month, following reductions announced by bigger mortgage rivals Wells Fargo & Co. and JPMorgan Chase & Co.
Bank of America shares rose 7.3 percent during the third quarter, the best showing among the four biggest commercial U.S. lenders. The bank closed at $14.24 yesterday for a 23 percent gain this year, trailing the 24-company KBW Bank Index by less than one percentage point. The shares were little changed in early New York trading today.
JPMorgan, the biggest U.S. lender by assets, posted a third-quarter loss of $380 million after taking a $7.2 billion charge to cover the cost of litigation and regulatory probes of the New York-based bank.
Wells Fargo, the biggest mortgage lender, said profit rose 13 percent to a record $5.58 billion as the San Francisco-based firm released reserves for credit losses. Citigroup Inc. profit, which rose to $3.23 billion from $468 million, missed some analysts' estimates as bond trading and mortgage lending slumped at the New York-based company, ranked third by assets.