Brian Moynihan, chief executive of Bank of America Corp., which reported… (Gerry Broome / Associated…)
Bank of America Corp. downsized its way to a profitable second quarter, shedding high-risk loans and cutting costs in reporting earnings of $2.5 billion -- 19 cents a share, beating Wall Street expectations of 16 cents.
Revenue shrank even more than analysts had expected, the giant Charlotte, N.C., bank reported Wednesday, coming in at $22 billion versus Wall Street's projection of $22.8 billion.
BofA said it had paid down its long-term debt by $53 billion during the quarter, while loans on the company's books declined by 5%, compared to second-quarter increases in loan totals at megabank rivals JPMorgan Chase & Co.,Citigroup Inc. and Wells Fargo & Co.
A year ago, BofA took a deep breath and threw $8.5 billion at the tsunami of legal claims stemming from its 2008 acquisition of Countrywide Financial Corp., the hyper-aggressive mortgage lender in Calabasas. The result: a loss of $8.8 billion, or 90 cents a share, on revenue of $13.2 billion
The Countrywide woes weren't exactly going away: Fannie Mae, Freddie Mac and private investors increased their demands that BofA buy back allegedly misrepresented home loans by billions of dollars.
But Bank of America said its clean-up had progressed enough to allow it to release $1.9 billion of the funds it holds in reserve against losses. That money dropped straight to the bottom line, meaning it accounted for three-quarters of the bank's profit.
In a phone call with analysts, Bank of America Chief Executive Brian Moynihan said he is fulfilling promises that his cost cuts would produce a more efficient company with more capital to guard against financial shocks.
Moynihan's New BAC initiative, named after the company's stock symbol, is aiming at reducing expenses by $8 billion a year.
Its first phase, cutting $5 billion, will reduce job rolls by 30,000. The bank hasn't said how many jobs will be lost in a second round, which it said Wednesday would result in $3 billion in annual savings. That latter effort will reduce costs in its capital markets, investment banking, commercial lending and wealth management businesses.
Bank of America shares fell 14 cents, or 1.8%, to $7.78 in midday trading Wednesday in New York.
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