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Bank Of America Q3 Provision For Credit Losses Rise 25% And Profit Drops 19.4%, But Results Top Expectations

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Bank of America Corp (NYSE: BAC) announced 25 percent more provision for credit losses in the second quarter than the year-ago quarter. Its profit attributable to common shareholders dropped 19.4 percent as revenue fell 7.1 percent. However, the results exceeded the Street analysts' expectations.

Bank of America reported net income attributable to common shareholders of $3.87 billion in the second quarter, down from $4.8 billion in the previous year quarter. Its net income also fell 17.7 percent to $4.2 billion or $0.36 a share from $5.1 billion or $0.0.43 a share in the corresponding period of the last year. Analysts predicted the bank to earn $0.33 a share. Both the quarterly results were impacted by special items.

The company's revenue on a FTE basis slipped 7.10 percent to $20.6 billion from $22.0 billion in the year-ago quarter. Excluding market related net interest income adjustments, as well as net debit valuation adjustments, revenue would have been slightly higher at $21.8 billion than $21.7 billion recorded in the earlier period.

Commenting on the results, Bank of America's CEO, Brian Moynihan, said, "We had another solid quarter in a challenging environment. Our responsible growth strategy led to improved customer and client activity, and each of our four business segments reported higher earnings than the year-ago quarter. We also moved closer to our longer-term performance targets. We continued to invest in core growth areas and to manage expenses, which were down 3 percent year over year to a level not seen since 2008."

Its CFO, Paul Donofrio, added, "We increased adjusted net interest income year over year in a difficult rate environment by growing deposits and loans within our risk and customer frameworks. That, coupled with a relentless focus on costs, drove improved operating leverage across all four of our business segments. Also, we increased book value per share by 8 percent and tangible book value per share by 11 percent, returned nearly $2 billion in capital to common shareholders this quarter, and announced plans to return more capital through both share repurchases and dividends over the next four quarters."

The company indicated it bought back $1.4 billion worth of stock in the second quarter and paid $0.5 billion as dividend to its shareholders. Its book value per share grew 8 percent to $23.67 while tangible book value per share advanced 11 percent to $16.68.

Its provision for credit losses increased 25 percent to $976 million from $780 million in the previous year quarter.

 

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