Bank of America swings to a profit in Q2
ASSOCIATED PRESS July 18, 2012 8:18AM
Updated: July 18, 2012 12:02PM
Bank of America swung to a profit from April through June and beat Wall Street expectations. It set aside the least money to cover bad loans since 2007, well before the financial crisis.
The bank said Wednesday that it made $2.1 billion in the second quarter, or 19 cents per share. Analysts polled by FactSet, a provider of financial data, had expected 16 cents.
Bank of America stock climbed 11 cents, or 1.4 percent, to $8.03 in premarket trading.
The bank set aside $1.8 billion in the quarter to cover bad loans, down 46 percent from a year earlier and a sign that the bank expects more customers to repay loans on time. It was the lowest figure since the first quarter of 2007.
Revenue was $22.2 billion, lower than analysts’ expectation of $22.8 billion. Revenue last year was $26.5 billion after excluding mortgage-related charges.
The bank issued more mortgages, but its mortgage unit still lost money. The bank is cleaning up problems lingering from its purchase four years ago of Countrywide Financial, which was known for exotic mortgages.
Countrywide’s legacy weighed heavily on Bank of America’s earnings in the second quarter of last year, when it lost $9.1 billion. The bank paid $8.5 billion to settle claims from investors who had bought its mortgages or mortgage-backed bonds and said they were misled about the quality of the mortgages.
Total loans for the second quarter fell 5 percent. Revenue in consumer banking fell as new government regulations restricted some revenue sources, including fees to charged to stores when customers pay with debit cards.
Revenue also fell in the investment banking unit as the bank brought in less in fees for underwriting and other services. Sales and trading revenue fell, which the bank blamed on investors’ low appetite for risk.
Net income rose in the wealth and investment management unit, and the bank added financial advisers.