The FINANCIAL — Bank of America Corporation reported net income of $168 million for the third quarter of 2014. After deducting dividends on preferred shares, the company reported a loss of $0.01 per share. The results include the previously announced pretax charge of $5.3 billion for the settlement with the Department of Justice, certain federal agencies and six states (DoJ Settlement), which impacted earnings per share by $0.43. Earnings in the year-ago period were $2.5 billion or $0.20 per diluted share, according to Bank of America Corporation.
Revenue, net of interest expense, on an FTE basis declined 1 percent from the third quarter of 2013 to $21.4 billion. Revenue, net of interest expense, on an FTE basis, excluding equity investment gains ($9 million in the third quarter of 2014 and $1.2 billion in the third quarter of 2013) and valuation adjustments related to changes in the company’s credit spreads, increased 1 percent from the year-ago quarter to $21.2 billion from $21.0 billion(G).
“We saw solid customer and client activity and improved profitability in most of our businesses relative to the year-ago quarter,” said Brian Moynihan, Chief Executive Officer. “We remain focused on streamlining and simplifying our company and connecting customers and clients with the real economy, an approach that is paying dividends for them and for our shareholders,” he added.
“We continued to focus on optimizing the balance sheet this quarter so we can best serve the core financial needs of our customers and clients and still be in a position to meet new capital and liquidity requirements in an evolving regulatory framework,” said Chief Financial Officer Bruce Thompson. “We also made significant progress on our cost structure, staying on track to meet the goals we established three years ago, and our credit quality metrics reflect both the improved environment and our risk underwriting.”
Net interest income, on an FTE basis, was comparable to the year-ago quarter at $10.4 billion as lower loan balances and yields were largely offset by reductions in long-term debt and improved funding costs, according to Bank of America Corporation.
Noninterest income was down 2 percent from the third quarter of 2013 to $11.0 billion. Excluding net debit valuation adjustments (DVA) and equity investment income in both periods, noninterest income was up 2 percent from the year-ago quarter, as modest increases across most categories were largely offset by a decline in mortgage banking income.
The provision for credit losses increased $340 million from the third quarter of 2013 to $636 million, driven by $400 million in incremental credit costs associated with the consumer relief portion of the DoJ Settlement. Net charge-offs declined 38 percent from the third quarter of 2013 to $1.0 billion, with the net charge-off ratio falling to 0.46 percent in the third quarter of 2014 from 0.73 percent in the year-ago quarter. Including the incremental credit costs associated with the DoJ Settlement, the reserve release was $407 million in the third quarter of 2014, compared to a reserve release of $1.4 billion in the third quarter of 2013, according to Bank of America Corporation.
Noninterest expense was $19.7 billion, compared to $16.4 billion in the year-ago quarter, driven by higher mortgage-related litigation expense, partially offset by reduced personnel expense. Excluding litigation expense of $5.6 billion in the third quarter of 2014 and $1.1 billion in the year-ago quarter, noninterest expense decreased 7 percent from the year-ago quarter to $14.2 billion, reflecting continued progress by the company to realize cost savings in its Legacy Assets and Servicing business and, to a lesser degree, Project New BAC.
The effective tax rate for the third quarter of 2014 was driven by the non-deductible portion of the DoJ Settlement charge, partially offset by certain discrete tax benefits contributing approximately $0.04 of earnings per share, which included the resolution of certain tax examinations, and by recurring tax preference items. The effective tax rate for the third quarter of 2013 was primarily driven by a $1.1 billion negative impact on the company’s deferred tax asset as a result of the change in the U.K. corporate income tax rate enacted in July.
At September 30, 2014, the company had 229,538 full-time employees, down 7 percent from the year-ago quarter and 2 percent below the second quarter of 2014, according to Bank of America Corporation.
Discussion about this post