Bank of America Corp (BAC) Earnings Rebound On Expense Drop Even As FICC Revenues Slide 9%

bank of america1Tyler Durden: 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 Bank of America Corp (NYSE:BAC) 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.”

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