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Bank Of America Earnings Rebound On Expense Drop Even As FICC Revenues Slide 9%
If yesterday's JPM results were largely a story of contracting trading revenues offset by a decline in expenses, then in many ways today's Bank of America results mimicked what Jamie Dimon did in the second quarter. Moments ago BofA reported that in a quarter in which it repurchased $775 million in stock, it generated $5.3 billion in net income, or $0.45 per share, above the $0.36 declining consensus estimate as a result of a $1.9 billion drop in non-interest expenses, even as FICC trading revenue tumbled just as it did for JPM and Jefferies, sliding 9% Y/Y, offset by a rise in equity trading courtesy of China.
However, the bottom line number benefited from the addition of the following "one-time" addbacks:
- $0.7B positive market-related NII adjustments 2, or $0.04 per share after-tax
- $0.4B gain from sales of consumer real estate loans, or $0.02 per share after-tax
- $0.2B benefit to representations and warranties provision (recorded in revenue), or $0.01 per share after-tax
Which implied the real EPS print was about $0.38. Considering the fudge factor was the usual reserve release, which in Q2 was $288 million. In other words, net of all other items, BofA's EPS were right as expected.
A quick look at the "internals" of the organic business reveals that in addition to non-GAAP revenue and EPS, BofA is now also adjusting its NIM data series, because while the reported Net Interest Income posted a modest increase to $10.7 billion,or 2.37% NIM - the highest in over a year - the actual NIM excluding market-related adjustments, dropped from 2.28% to 2.22% the lowest in over a year, and amounting to $10.05 billion. Funny how that happens.
Also notable: after declining for several quarters, BofA's loans and leases actually managed a modest rebound in Q2.
But the biggest highlight was once again in the income statement, and specifically the Global Markets breakdown, where Net Income dropped $109 million from a year ago, driven by a 9% drop in FICC Y/Y "due to declines in credit-related businesses, primarily credit, mortgages and municipals, partially offset by improvements in macro products."
On the other hand, just like with JPM, "equities revenue improved $0.1B, or 13%, from 2Q14, driven largely by increased client activity in the Asia-Pacific region and strong performance in derivatives." In short: while traders are increasingly pulling away from illiquid, volatile fixed-income, it was the Chinese stock bubble to the rescue.
So with the bank's lifeblood dropping it had no choice but to once again trim expenses, which it did thanks to not only a drop in litigation charges (expect these to rebound in the coming quarters)...

... but also due to ongoing headcount reductions.
And while the bank's entire earnings release once again focuses on the improvement in credit quality and trends, it is worth asking just why did BofA decide to take its largest provision for losses in the past two quarters at any time over the past year.
In short: in a world in which FICC is no longer the trophy horse it once was, and where the bank has no choice but to "adjust" its NIM data suggesting things are hardly improving for the bank's organic net interest arbitrage business (as was the case with JPM), BofA will have trouble growing in the coming quarters absent a material change to market conditions, especially if the Chinese bubble has indeed burst and Q3 will no longer see the benefit of equity trading thanks to Asian farmers and housewives.
Full report below.
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They stopped all the blood rituals in the Cayman's.....it adds up.
They're still going to the Grove....someone else is footing that bill.
/s <--- just in case
B of A sucks! Why anyone would use them as their bank is beyond me! If you have to bank, use a local credit union and stay clear of these big banks!
0.8B Provision for credit Losses on a 5.3B on net income!!! that's like 15%
Sounds like a great business model sarc ...............when you concider most businesses strugle to net 10%
The Enron group would be envious of this bullshit...
I guess money laundering and butt-raping customers for fees is paying off.
They tried to charge me 5 bucks once to cash their own check, written on their bank, Why anyone does any business with these maggots is beyond my comprehesive ability.
"Fun with numbers" 101
Just keep the AK-47 away from them....
https://www.youtube.com/watch?v=GhxqIITtTtU
ISIS Leader Admits We Are Being Funded By The Obama Administration
http://govtslaves.info/isis-leader-admits-we-are-being-funded-by-the-oba...
Well keep it up boys if you keep buying up that stock in about 72 more years your shareholders might get back to square one after those back to back reverse splits you screwed them with in 2008.
Why didn't Global Crossings fudge their numbers like this?
The mortgage business is dead. Purchased real estate is largely done in cash.
So banksters have to prop trade even though they don't, get it?
And yellen is happy to financially back this to keep the "everything is fine" narrative going.