EmailBank of America (BAC $7.96 +0.04) reported second quarter earnings of $0.19 per share, $0.05 better than the Capital IQ Consensus of $0.14, while revenues rose 64.7% year/year to $22.2 billion versus the $23.2 billion consensus. Relative to the same quarter a year ago, the results for Q2 reflect higher mortgage banking income, driven largely by lower provisions for representations and warranties, the absence of the goodwill impairment charge and improved credit quality across most major portfolios. In addition, the company had solid contributions from the wealth management and corporate and commercial banking businesses. This was partially offset by lower net interest income from the continued low-rate environment and lower loan levels.
Capital Levels As of June 30, 2012, the company's Basel 3 Tier 1 common capital ratio on a fully phased-in basis was estimated at 8.10%. This compares with the company's previous guidance of achieving a Basel 3 Tier 1 common capital ratio of more than 7.50% on a fully phased-in basis by year-end 2012. Bank of America extended approximately $107 billion in credit in the second quarter of 2012. Provision Builds Down The provision for credit losses declined 46% from the year-ago quarter, reflecting improved credit quality across most major consumer and commercial portfolios and the impact of underwriting changes implemented over the past several years. The allowance for loan and lease losses to annualized net charge-off coverage ratio was 2.08x in Q2, compared with 1.97x in Q1 and 1.64x 2Q11. Lowers European Exposure The company continued to manage its sovereign and non-sovereign exposures in Europe. Total exposure to Greece, Italy, Ireland, Portugal and Spain, including net credit default protection, declined to $9.6 billion at June 30, 2012, from $9.8 billion at March 31, 2012 and $16.7 billion at June 30, 2011. Lowers Expenses Noninterest expense declined to $17.0 billion in Q2 from $19.1 billion in tQ1 and $22.9 billion in 2Q11 as the company continued to focus on streamlining and simplifying its businesses. Bank of America remains on track to exceed its previously announced goal of achieving 20% of the $5 billion in annualized targeted cost savings from Phase 1 by the end of 2012. With Phase 2 evaluations now complete, the company expects a total of $8 billion in annualized cost savings from New BAC by mid-2015.
