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Profit Rises 31% at Bank of America

Income increases in all the major divisions. The company sets aside $100 million for costs associated with probes.

October 15, 2003|From Reuters

Bank of America Corp., the No. 3 bank in the U.S., said Tuesday that third-quarter profit rose 31%, topping analyst estimates, as mortgage banking income tripled and profit grew in all its major businesses.

The Charlotte, N.C.-based bank also set aside $100 million to pay legal and other costs related to regulatory probes in the mutual fund trading scandal, exclusive of potential fines and settlements, and $75 million for other litigation.

Bank of America said net income rose to $2.92 billion, or $1.92 a share, from $2.24 billion, or $1.45, a year earlier. Revenue rose 14% to $9.92 billion. Analysts polled by Reuters had forecast profit of $1.69 a share.

The bank said consumer and commercial banking profit jumped 28% to $2.15 billion as revenue grew 14% to $6.89 billion. Mortgage fees tripled to $666 million, and credit card fees rose 16% to $794 million.

Investment banking profit rose 33% to $513 million, with revenue up 13% to $2.25 billion. Income from asset management, including its Nations Funds unit, jumped 95% to $123 million as revenue rose 8% to $615 million.

Chief Financial Officer James Hance said the bank was underwriting more stocks and bonds and adding staff for an anticipated pickup in merger activity.

He said that mortgage originations had fallen by about half since June, but that mortgage banking profit should fall less. "It's not an impact we can't deal with," he said.

Shares in the bank closed Tuesday on the New York Stock Exchange at $82.50, up 76 cents.

Chairman and Chief Executive Kenneth Lewis said the bank was doing a better job adding and retaining customers. Bank of America opened more than 1 million checking accounts this year and plans within three years to add 500 branches to the current 4,211.

The quarter, however, brought much unwelcome media coverage as investigators probed whether Bank of America allowed the Canary Capital Partners hedge fund to illegally trade Nations funds at the expense of ordinary investors.

Bank of America has fired several employees, including mutual fund chief Robert Gordon, since New York Atty. Gen. Eliot Spitzer brought his complaint against Canary and a former bank broker was charged.

"We are doing all we can to deal with this head on," Hance said. "We want to offset customer concerns that we're not watching out for their interests."

The bank set up a restitution fund for Nations shareholders harmed by Canary activities and said it may make restitution to holders of third-party mutual funds hurt by Canary.

Hance said Bank of America was continuing its internal fund probe and still wanted to expand in wealth management.

"It's a natural opportunity for our business and our customers, and we're still too small," he said in a conference call.

The bank reported that loans rose 9% to $373 billion, deposits rose 8% to $409 billion, and assets rose 12% to $737 billion.

Bank of America set aside $651 million to cover bad loans, down 19%, and net charge-offs, or loans on which it does not expect to be paid back, fell 3% to $776 million. Nonperforming assets, including bad loans, fell 29% to $3.66 billion.

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