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BofA Weathers The Storm
Investment banking revenue came in at $765 million, the second-highest result on record.
July 21, 2008
Bank of America helped keep the new-found momentum in the financial-services sector going Monday, posting second-quarter results that were not as bad as feared.
The company posted second-quarter net income of $3.4 billion, or 72 cents a share, versus $5.76 billion, or $1.28, in the year-earlier period. Net revenue (revenue less interest expenses) edged up 3.5%, to $20.3 billion.
Within BofA’s global corporate and investment banking business, investment banking revenue came in at $765 million, the second-highest result on record.
"We are pleased with these solid results in a difficult financial environment," said Ken Lewis, BofA’s chairman and chief executive officer, in a press release. "Outside of real estate-related products, our operating results were quite good virtually across all business segments. This performance demonstrates not only the advantages of our company's diversity and scale, but also the ability of our associates to differentiate Bank of America in the eyes of customers and clients."
While the latest results were off sharply from year-ago levels, they did manage to top Wall Street’s expectations. Analysts were looking for the bank to earn 53 cents a share on revenue of about $18.4 billion.
Shares of BofA jumped by nearly 7% Monday afternoon, or $1.84, to $29.33. Coming off a stellar week, financial stocks overall were generally firmer but not showing the sharp rallies seen in the latter half of last week, when many moved higher by 30% or more. BofA itself rose by about 50% in the last three days of the week.
The bank’s tier 1 capital ratio was 8.25%, down from 8.52% a year earlier but up from 7.51% at the end of the first quarter after the company raised about $7 billion in capital through the issuance of preferred stock.
BofA did say that credit quality continued to weaken, particularly in markets that saw the biggest drop in home prices. Net charge-offs and nonperforming assets continued to increase, and provision expense rose $4 billion from a year ago to $5.83 billion, reflecting net charge-offs of $3.62 billion and additions to the allowance for loan and lease losses of $2.21 billion.
As for the acquisition of Countrywide, wrapped up on July 1, BofA now says the buy will actually be accretive to this year’s earnings, having said initially that the deal would be earnings neutral. “The estimated cost savings have been significantly increased from the after-tax $670 million projected in January,” the company said.
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