Bank of American reports $4bn profits

Bank of America is reported to be sitting on $494.7 billion in cash and to hold $539.9 billion in debt, spread across dozens of different issues, according to Yahoo Finance, giving Bank of America a debt to equity ratio of 124 percent, according to Morningstar.

In the year-earlier period, the bank had a loss of $470 million, or 4 cents per share, as it took a $5.6 billion charge related to the mortgage settlement.

“With the focus in the USA swinging back to quarterly earnings season, investors are becoming more cautious”, said Ian Williams, an economist and strategist at Peel Hunt, in a note early Wednesday.

For Bank of America, which reported earnings that topped earnings expectations Wednesday, this could mean even more cuts – or at least, elimination by attrition. The most bullish analyst sees the company reporting earnings per share of $1.62 while the most bearish analyst is predicting a current year EPS number of $1.3.

In a statement, CEO Brian Moynihan characterized the bank’s latest results as “solid”. A few might argue that Bank of America’s EPS growth rate justifies these debt numbers, though the relative strength of BAC shares over the past 12 months would not seem to agree with this argument.

The crunch in fixed income, currencies and commodities trading hit the bank’s global markets arm, as revenue on those trading desks fell 11pc.

Those legal fees previous year were actually US$6bn, down to US$231m now, while net interest income fell 6.7pc to US$9.74bn, and bond trading revenue declined nearly 11pc to US$2bn. The business had revenue of $20.91 billion for the quarter, compared to analyst estimates of $20.77 billion.

M&T Bank Corporation has dropped 5.52% during the last 3-month period. But she and others also said that the bank will need to prove that it can boost revenue and pass the Federal Reserve stress test without hitches.

At the end of the third quarter, Bank of America’s balance sheet showed a total book value of $22.41 per share, which reflects a 2.3% Q/Q increase.

However, Legacy Assets and Servicing faced a net loss of $196 million which is fairly low as compared to a net loss of $5.1 billion for the same quarter past year. The lower expenses also came because the unit that handles troubled mortgages is shrinking as the bank moves farther away from the financial crisis. Noninterest income was up 2%, or $181 million, from the year-ago quarter to $11.2 billion.

As of 6:42 AM EDT, Bank of America is trading up 0.45% at $15.59.

BofA has been slashing billions of dollars in costs in its commercial lending, investment banking and wealth management businesses as overnight fund rates remain near zero and worries about China’s economy and uncertainty over the timing of a US rate hike keep traders from making big bets.

“That would make the stock a lot more attractive”, he said.

One of Mr. Moynihan’s key tenets of turning around the bank is cost-cutting.