Bank of America Profit Rises 41% on Credit-Card Fees
Bloomberg.com
By Will Edwards
Oct. 19 (Bloomberg) -- Bank of America Corp., the second- largest U.S. bank by assets, said earnings rose 41 percent in the third quarter on soaring credit-card fees from its acquisition of MBNA Corp. and the sale of a Brazilian unit.
Net income jumped to a record $5.42 billion, or $1.18 a share, from a restated $3.84 billion, or 95 cents, a year earlier, the Charlotte, North Carolina-based company said today in a statement. Excluding merger and restructuring costs, profit was $1.22 a share, beating the $1.15 average estimate of 25 analysts surveyed by Thomson Financial.
The MBNA purchase in January added 20 million customers and gave Bank of America higher-yielding loans, helping to compensate for 17 Federal Reserve interest-rate increases that squeezed profit margins over the past two years. Chief Executive Officer Kenneth Lewis has cut about 5,000 of the 6,000 jobs he targeted when the $35 billion deal was announced in June 2005.
``I'm really impressed,'' said Bruce Foerster, the former head of equity syndicate at Lehman Brothers Holdings Inc. who now owns South Beach Capital Markets, a Miami-based advisory firm. ``Bank of America truly understands the branch-banking business and the consumer business.''
The company sold its BankBoston unit in Brazil to Banco Itau Holding Financeira SA during the quarter, resulting in a $720 million pretax gain. Excluding the gain and $469 million in losses from debt securities sales, the bank earned $1.19 a share, according to Jefferson Harralson, an Atlanta-based analyst at Keefe Bruyette & Woods Inc.
Combining Companies
Shares of Bank of America gained 17 percent this year through yesterday, the third-best performance of 24 companies in the Philadelphia KBW Bank Index, which has risen 9.8 percent. They rose 4 cents to $53.85 in early trading today.
Revenue increased 32 percent to $19 billion, and would have gained 10 percent had MBNA been a part of the company in the year-earlier quarter, the bank said. Revenue at the consumer and small business banking unit, which contributed more than half of profit, climbed 44 percent to $10.4 billion, led by the higher card fees. Including MBNA a year ago, it gained 4 percent.
Income from credit and debit cards surged to $3.47 billion from $1.52 billion a year earlier. It fell from $3.66 billion in the second quarter. Card charge-offs, or borrowings the bank can't collect, increased to $1.09 billion from $904 million in the previous three months.
U.S. Consumers
``There's nothing in any of the information that we see to lead you to think the consumer has any significant level of weakness,'' Chief Financial Officer Alvaro de Molina said in an interview.
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By Will Edwards
Oct. 19 (Bloomberg) -- Bank of America Corp., the second- largest U.S. bank by assets, said earnings rose 41 percent in the third quarter on soaring credit-card fees from its acquisition of MBNA Corp. and the sale of a Brazilian unit.
Net income jumped to a record $5.42 billion, or $1.18 a share, from a restated $3.84 billion, or 95 cents, a year earlier, the Charlotte, North Carolina-based company said today in a statement. Excluding merger and restructuring costs, profit was $1.22 a share, beating the $1.15 average estimate of 25 analysts surveyed by Thomson Financial.
The MBNA purchase in January added 20 million customers and gave Bank of America higher-yielding loans, helping to compensate for 17 Federal Reserve interest-rate increases that squeezed profit margins over the past two years. Chief Executive Officer Kenneth Lewis has cut about 5,000 of the 6,000 jobs he targeted when the $35 billion deal was announced in June 2005.
``I'm really impressed,'' said Bruce Foerster, the former head of equity syndicate at Lehman Brothers Holdings Inc. who now owns South Beach Capital Markets, a Miami-based advisory firm. ``Bank of America truly understands the branch-banking business and the consumer business.''
The company sold its BankBoston unit in Brazil to Banco Itau Holding Financeira SA during the quarter, resulting in a $720 million pretax gain. Excluding the gain and $469 million in losses from debt securities sales, the bank earned $1.19 a share, according to Jefferson Harralson, an Atlanta-based analyst at Keefe Bruyette & Woods Inc.
Combining Companies
Shares of Bank of America gained 17 percent this year through yesterday, the third-best performance of 24 companies in the Philadelphia KBW Bank Index, which has risen 9.8 percent. They rose 4 cents to $53.85 in early trading today.
Revenue increased 32 percent to $19 billion, and would have gained 10 percent had MBNA been a part of the company in the year-earlier quarter, the bank said. Revenue at the consumer and small business banking unit, which contributed more than half of profit, climbed 44 percent to $10.4 billion, led by the higher card fees. Including MBNA a year ago, it gained 4 percent.
Income from credit and debit cards surged to $3.47 billion from $1.52 billion a year earlier. It fell from $3.66 billion in the second quarter. Card charge-offs, or borrowings the bank can't collect, increased to $1.09 billion from $904 million in the previous three months.
U.S. Consumers
``There's nothing in any of the information that we see to lead you to think the consumer has any significant level of weakness,'' Chief Financial Officer Alvaro de Molina said in an interview.
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