With the run the bank stocks have had in recent weeks, it seems necessary to point out just how much a bank's stock has gone up before discussing its earnings results since many could fall victim to a sell-the-news response. Enter Bank of America (BAC 25.45), which reported its third quarter results this morning and which saw its stock rise as much as 13% between September 8 and October 6.
The results put up by Bank of America were decent overall, but not spectacular.
- Net income increased 13% and diluted earnings per share jumped 17% to $0.48, which exceeded analysts' average expectation
- Revenue, net of interest expense, increased 1% to $21.8 billion
- Provision for credit losses decreased 2% to $834 million
- Noninterest expense declined 3% to $13.1 billion while the bank's efficiency ratio improved to 60% from 62%
- Average loan balances increased 6% to $842 billion; and
- Net interest margin increased 13 basis points year-over-year to 2.36% (and two basis points from 2.34% in second quarter)
The soft spot for the bank was its sales and trading business. Excluding net debit valuation adjustment, sales and trading revenue declined 15% versus last year to $3.92 billion, with fixed income, commodities and currency revenue falling 22% and equities revenue increasing 2% against a strong period a year ago.
The core Consumer Banking segment, however, had a solid showing. Total revenue increased 10% to $8.8 billion with loans up 8% and net income increasing 15%. The Global Wealth and Investment Management segment registered a 6% increase in revenue to $4.62 billion and a 10% increase in net income. The Global Banking segment, meanwhile, saw revenues rise 5.0% to $5.0 billion and net income increase 13%.
Bank of America's book value per share declined 1% to $23.92, yet its tangible book value per share increased 1% to $17.23.
Shares of BAC are up 1.1% in pre-market trading. Whether BAC's positive disposition holds will depend in large part on whether investors ultimately think this report merits a further extension for the stock or whether they see it as a basis to take some money off the table.
The initial response, though, is certainly better than the treatment JPMorgan Chase (JPM 95.99) and Citigroup (C 72.37) received following their better-than-expected earnings reports on Thursday. JPM declined 0.9% and Citigroup fell 3.4%.