Bank of America beats by $0.01, reports revs in-line
Reports Q3 (Sep) earnings of $0.20 per share, $0.01 better than the Capital IQ Consensus Estimate of $0.19; revenues rose 5.3% year/year to $21.74 bln vs the $21.74 bln consensus. Relative to the year-ago quarter, the results for the third quarter of 2013 were driven by reduced negative credit valuation adjustments on the company's credit spreads and increases in equity investment income, net interest income and investment and brokerage income. The company also benefited from improved credit quality and lower expenses. These factors were partially offset by lower mortgage banking income and the negative impact from remeasuring certain deferred tax assets due to the U.K. corporate income tax rate reduction enacted in July 2013. •Net interest income, on an FTE basis, totaled $10.5 billion in the third quarter of 2013, compared to $10.2 billion in the third quarter of 2012A. The improvement was driven by reductions in long-term debt balances, less negative market-related premium amortization, lower rates paid on deposits, and higher commercial loan balances. These factors were partially offset by lower consumer loan balances and lower asset yields. •Net interest margin was 2.44 percent in the third quarter of 2013, compared to 2.32 percent in the third quarter of 2012. •Noninterest income increased $774 million from the year-ago quarter, led by lower negative FVO adjustments, higher equity investment income primarily related to the gain on the sale of the company's remaining China Construction Bank (CCB) shares in the current quarter, and improved investment and brokerage income.The provision for credit losses was $296 million in the third quarter of 2013, down $915 million from the second quarter of 2013 and $1.5 billion less than the third quarter of 2012. •The provision for credit losses was lower than net charge-offs, resulting in a $1.4 billion reduction in the allowance for credit losses in the third quarter of 2013. •Noninterest expense was $16.4 billion, compared to $17.5 billion in the year-ago quarter, driven primarily by lower litigation expense, reduced expenses in Legacy Assets and Servicing (LAS) and lower personnel expense as the company continued to streamline processes and achieve cost savings. •Litigation expense was $1.1 billion in the third quarter of 2013, compared to $471 million in the second quarter of 2013 and $1.6 billion in the third quarter of 2012. Consumer & Business Banking •Consumer and Business Banking reported net income of $1.8 billion, up $428 million, or 32 percent, from the year-ago quarter, driven by higher revenue, lower provision expense and lower noninterest expense. Revenue of $7.5 billion increased $263 million from the year-ago quarter, driven by higher net interest income, partially offset by the impact of the continued low-rate environment on deposit spreads and lower average loans. •Consumer Real Estate Services reported a net loss of $1.0 billion for the third quarter of 2013, compared to a net loss of $857 million for the same period in 2012. Revenue declined $1.5 billion from the third quarter of 2012 to $1.6 billion. Noninterest income was $844 million, a decrease of $1.5 billion from the year-ago quarter, primarily due to lower servicing income and lower core production revenue. Core production revenue was $465 million in the third quarter of 2013, down from $944 million in the year-ago quarter, due largely to lower interest rate lock commitments and lower margins. The provision for representations and warranties was $323 million in the third quarter of 2013, compared to $307 million in the third quarter of 2012. Global Wealth and Investment Management •Global Wealth and Investment Management net income rose 26 percent from the third quarter of 2012 to $719 million, reflecting solid revenue performance and low credit costs. Revenue increased 8 percent from the year-ago quarter to $4.4 billion, driven by higher asset management fees related to long-term AUM flows and higher market levels, as well as higher net interest income. Global Banking •Global Banking reported net income of $1.1 billion in the third quarter of 2013, slightly down from the year-ago quarter, as an increase in revenue was offset by higher provision for credit losses as the company continued to build reserves for loan growth. Revenue of $4.0 billion was up $223 million, or 6 percent, from the third quarter of 2012, reflecting higher net interest income driven by loan growth. Global Markets reported a net loss of $778 million in the third quarter of 2013, compared to a loss of $276 million in the year-ago quarter. Excluding DVA and the impact of the U.K. tax rate change, net income was $531 million in the third quarter of 2013, compared to $872 million in the year-ago quarter. Global Markets revenue increased $98 million, or 3 percent, from the year-ago quarter to $3.4 billion. Excluding DVAF, revenue decreased $193 million, or 5 percent, to $3.7 billion driven by lower revenue across the Fixed Income businesses partially offset by improved performance in Equities. DVA losses were $291 million, compared to losses of $582 million in the year-ago quarter. •Fixed Income, Currency and Commodities sales and trading revenue, excluding DVAG, was $2.0 billion in the third quarter of 2013, a decrease of $501 million from the year-ago quarter, driven by lower market volumes arising from concerns around monetary policy as well as political uncertainty domestically and abroad. •Equities sales and trading revenue, excluding DVAG, was $970 million, an increase of $255 million, or 36 percent, from the year-ago quarter due to continued gains in market share and increased market volumes. Capital •As of September 30, 2013, the company's Tier 1 common capital ratio on a Basel 3 fully phased-in basis under the advanced approach is estimated at 9.94 percent, up from 9.60 percent at June 30, 2013 and 8.97 percent at September 30, 2012. The increase in the estimated Basel 3 Tier 1 common capital ratio from the second quarter of 2013 was primarily due to earnings, lower deductions for deferred tax assets and increases in accumulated other comprehensive income. Estimated Basel 3 risk-weighted assets increased modestly compared to the second quarter of 2013. •Tangible book value per share was $13.62 at September 30, 2013, compared to $13.32 at June 30, 2013 and $13.48 at September 30, 2012. Book value per share was $20.50 at September 30, 2013, compared to $20.18 at June 30, 2013 and $20.40 at September 30, 2012.