Bank of America Stock Slides Despite Smaller Than Expected Per-Share Loss# Stock
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With a nearly $17 billion mortgage settlement with the Department of Justice
on its books, Bank of America knew its third quarter earnings would take a
hit — a 43-cent per-share hit, in fact. Wall Street analysts, too, forecast
an earnings loss for the quarter, calling for the bank to post a 9-cent per
-share loss for the quarter. And while Bank of America did fulfill
predictions of a a per-share loss, the loss the company reported Wednesday
morning was smaller than expected. However, due to a more-than $200 million
dip in revenue compared to the year-ago period, shares of the bank are down
in early Wednesday trading.
Excluding special items, Bank of America posted $21.4 billion in third
quarter revenue, edging above the $21.3 billion Street consensus but falling
under the $21.7 billion reported as third quarter revenue in 2013. Net
income for the quarter came in at $168 million which, after deducting
dividends on preferred shares, resulted in a one-cent per-share loss for the
quarter. Though this is a significant change from the 20 cents in earnings
per share reported this time last year, the one-cent per-share loss marks an
8-cent beat over what analysts were predicting and includes the previously-
disclosed 43-cent per-share hit from the DOJ settlement.
“We saw solid customer and client activity and improved profitability in
most of our businesses relative to the year-ago quarter,” BofA CEO Brian
Moynihan said in a statement Wednesday morning. “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.”
Within the bank’s business segments, consumer and business banking revenue
was flat compared to the prior-year period, though average deposits
increased 4% thanks to demand for liquid products that has emerged in the
existing low-rate environment. Consumer real estate revenue declined $484
million, a drop the bank attributed to “lower servicing fees from a smaller
servicing portfolio, lower mortgage servicing rights results and lower core
production revenue due to fewer loan originations.” BofA originated $11.7
billion in first-lien residential mortgage loans and $3.2 billion in home
equity loans during the quarter, an increase compared to the $11.1 billion
and $2.6 billion (respectively) originated during the second quarter of this
year but a decline compared to the $22.6 billion and $1.8 billion (
respectively) reported for the third quarter of 2013.
Meanwhile, global wealth and investment management and global banking
revenues increased compared to the year-ago period with global wealth and
investment management client balances growing 8% to $2.46 trillion.
Though the bank’s results were mixed, Citi analyst Keith Horowitz said in a
note Wednesday morning that BofA’s core results do look good, noting, “
the beat versus our estimate was driven largely by a better tax rate,
although core results were also better than expected. We peg core earnings
per share at 33 cents per share, in line with 33 cents per share in the
second quarter.” He added, “While it was a messy quarter, core results
look okay, and we would expect the stock to be up today on the results.”
This stock prediction was true in early pre-market trading — BofA stock was
up about 0.2% around 8:30am ET — but shares of BofA reversed these gains
early in the regular trading session, opening lower than Tuesday’s close
and hitting a 4% decline shortly after 9:30am ET. The stock is currently
down 3.03%; year-to-date, it’s gained just 2.6%.
http://www.forbes.com/sites/maggiemcgrath/2014/10/15/bank-of-am
on its books, Bank of America knew its third quarter earnings would take a
hit — a 43-cent per-share hit, in fact. Wall Street analysts, too, forecast
an earnings loss for the quarter, calling for the bank to post a 9-cent per
-share loss for the quarter. And while Bank of America did fulfill
predictions of a a per-share loss, the loss the company reported Wednesday
morning was smaller than expected. However, due to a more-than $200 million
dip in revenue compared to the year-ago period, shares of the bank are down
in early Wednesday trading.
Excluding special items, Bank of America posted $21.4 billion in third
quarter revenue, edging above the $21.3 billion Street consensus but falling
under the $21.7 billion reported as third quarter revenue in 2013. Net
income for the quarter came in at $168 million which, after deducting
dividends on preferred shares, resulted in a one-cent per-share loss for the
quarter. Though this is a significant change from the 20 cents in earnings
per share reported this time last year, the one-cent per-share loss marks an
8-cent beat over what analysts were predicting and includes the previously-
disclosed 43-cent per-share hit from the DOJ settlement.
“We saw solid customer and client activity and improved profitability in
most of our businesses relative to the year-ago quarter,” BofA CEO Brian
Moynihan said in a statement Wednesday morning. “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.”
Within the bank’s business segments, consumer and business banking revenue
was flat compared to the prior-year period, though average deposits
increased 4% thanks to demand for liquid products that has emerged in the
existing low-rate environment. Consumer real estate revenue declined $484
million, a drop the bank attributed to “lower servicing fees from a smaller
servicing portfolio, lower mortgage servicing rights results and lower core
production revenue due to fewer loan originations.” BofA originated $11.7
billion in first-lien residential mortgage loans and $3.2 billion in home
equity loans during the quarter, an increase compared to the $11.1 billion
and $2.6 billion (respectively) originated during the second quarter of this
year but a decline compared to the $22.6 billion and $1.8 billion (
respectively) reported for the third quarter of 2013.
Meanwhile, global wealth and investment management and global banking
revenues increased compared to the year-ago period with global wealth and
investment management client balances growing 8% to $2.46 trillion.
Though the bank’s results were mixed, Citi analyst Keith Horowitz said in a
note Wednesday morning that BofA’s core results do look good, noting, “
the beat versus our estimate was driven largely by a better tax rate,
although core results were also better than expected. We peg core earnings
per share at 33 cents per share, in line with 33 cents per share in the
second quarter.” He added, “While it was a messy quarter, core results
look okay, and we would expect the stock to be up today on the results.”
This stock prediction was true in early pre-market trading — BofA stock was
up about 0.2% around 8:30am ET — but shares of BofA reversed these gains
early in the regular trading session, opening lower than Tuesday’s close
and hitting a 4% decline shortly after 9:30am ET. The stock is currently
down 3.03%; year-to-date, it’s gained just 2.6%.
http://www.forbes.com/sites/maggiemcgrath/2014/10/15/bank-of-am