Bank of America reported Wednesday, July 15, that its profits more than doubled in the second quarter, as consumer deposits and mortgage originations rose and expenses dipped to their lowest since the financial crisis.
The bank reported a net income of $4.9 billion, marking a 145 percent increase. An improvement in credit among US consumers also contributed to the bank’s growth, boosting its total revenue by 2 percent to $22.3 billion in the second quarter, surpassing analyst forecasts of $21.4 billion.
Bank of America also exceeded expectations of 36-cent earnings per share, posting 45 cents per share in the quarter.
“Solid core loan growth, higher mortgage originations and the lowest expenses since 2008 contributed to our strongest earnings in several years, as we continued to build broader and deeper relationships with our customers and clients,” Bank of America CEO Brian Moynihan said in a statement. “We also benefited from the improvement in the US economy, where we are particularly well positioned.”
Another contributing factor to Bank of America’s increased profits was its mortgage banking revenue, which nearly doubled to $1 billion. More than half of new mortgage loans in the second quarter were for home purchases, rather than for refinancings that formerly drove the bank’s revenue, according to Reuters.
New mortgages and home equity loans rose 40 percent.
The bank further posted a 3 percent increase in income from investment and brokerage services to $3.39 billion. Revenue from the bank’s Merrill Lynch Global Wealth Management business remained mostly the same at $3.79 billion.
Non-interest expenses for the bank fell 25.5 percent to $13.82 billion in the quarter, while net interest grew 4.7 percent to $10.49 billion.
Litigation expenses, which compromised cost-cutting measures Moynihan introduced since he assumed his position in 2010, dropped to $175 million compared to $4 billion a year earlier, Reuters reported.
Since 2008, its legal expenses have cost at least $70 billion.
The expense cuts are being viewed favorably by Wall Street in a relatively slack quarter for consumer and investment banking conglomerates, Forbes reported.
“Headline number not as strong as advertised given several one-time gains. However, improved core loan growth and expense improvement are both welcomed. Still, a continued decline in its core Net Interest Margin, a $1 billion jump in criticized commercial loans, and below peer capital ratios are areas to watch,” Barclays analyst Jeffrey Goldberg wrote in a note to clients, according to Forbes.
The number of first-mortgage loan holders delinquent by 60 days or more fell by half, compared to the same period a year earlier, to 132,000.
“I think we are moving into a more normalized environment…and are getting away from the legacy issues,” Bruce Thompson, the bank’s chief financial officer, said during a call with reporters. (With reports from Forbes, Reuters, The Associated Press and USA Today)