Bank of America Crushes Estimates On Accounting Profits

On what is an all too familiar theme so far this quarter, Bank of America BAC reported better than expected second quarter results. However, shares were volatile following the release as the quality of the earnings came into question, which has been a common theme this earnings season for bank stocks.

Second Quarter Highlights

For the second quarter of 2013, Bank of America reported earnings per share of $0.32 vs. the $0.25 consensus forecast, beating by 28.00 percent. Earnings per share rose 68.4 percent from a year ago when the company reported earnings per share of $0.19.

"We are doing more business with our customers and clients, and gaining momentum across every customer group we serve," said Chief Executive Officer Brian Moynihan. "We must keep improving, but with the consumer recovering and businesses strong, we have lots of opportunity ahead.”

Bank of America also reported better than expected revenue for the second quarter. Bank of America reported second quarter revenue of $22.9 billion vs. the forecast of $22.79 billion, a beat of 0.48 percent. Revenues rose 4.23 percent from a year ago when the company reported revenues of $21.97 billion.

Related: What the Heck Are Loan Loss Reserves and Why Are Banks Making Money From Them?.

"At the beginning of the year, we said we would focus on three things – revenue stability, strengthening the balance sheet and managing costs," said Chief Financial Officer Bruce Thompson. "This quarter, we delivered on all three. Revenue increased 3 percent, we continued to build capital ratios, despite the negative impact of higher interest rates on our bond portfolio, and we reduced expenses related to servicing delinquent mortgage loans at a faster rate than we originally expected."

Loan Loss Reserves Strike Again

Bank of America saw a boost from loan loss reserves, as the expected losses on loans decreased. Bank of America saw a pretax boost of $1.206 billion on net income of $4.0 billion, which means that the reduction in loan loss reserves, contributed over 30 percent to net income.

Similar patterns were seen in earnings from other big banks, including Citigroup C and J.P. Morgan Chase JPM. Citigroup saw a boost of $784 million, or 18.67 percent of income, while J.P. Morgan's net income was boosted 23.08 percent by a reduction in loan loss reserves of $1.5 billion.

Stock Volatile

Shares were volatile in the pre-market ahead of the release. Shares traded in a wide $0.31 band, bouncing back and forth between $14.16 and $13.85 in the pre-market and were currently higher by a little bit.