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Bank of America earnings hit $3.6 billion, highest since fall 2011

For the first time in a year, Bank of America’s earnings report Wednesday was all about the numbers. And those, as it turned out, were pretty good.

Without the legal settlements that have dragged down profits for the past nine months, Bank of America earned $3.6 billion for shareholders in the second quarter. That’s up 70 percent from the year before, and at 32 cents per share is the highest it’s been since fall 2011.

Like its peers, Bank of America had a particularly strong quarter in its equity trading business. At the same time, the bank set aside less on bad loans and was able to shed nearly a quarter of its delinquent home loans.

“We feel we had a very strong quarter, and it’s reflective of the earnings power of Bank of America as we continue to work through and put the legacy issues behind us,” Chief Financial Officer Bruce Thompson said on a conference call with reporters.

Bank of America shares were up more than 3 percent by mid-day, setting a new 52-week high at $14.37. The stock price is up almost 25 percent so far this year.

But the bank still has a good deal of work ahead of it, analysts said. The bank’s mortgage unit is still losing money as it digs out from the housing crisis. While revenue increased 3 percent from last year, it was still down from the first quarter.

To keep up, Bank of America is still slashing its workforce and expenses, and investors are looking for more cost cuts.

"I think it’s the first really good quarter they’ve had in quite some time,” said Jim Sinegal, an analyst for Morningstar. But, he said, "We’re not getting too excited yet."

Cost cuts

Nearly two years in to a massive companywide cost cutting program known as Project New BAC, after the bank’s ticker symbol, Bank of America continues to shed jobs at a rapid clip.

The bank’s employee headcount fell another 2 percent in the second quarter, hitting just more than 257,000, according to Wednesday’s report. The quarter pushed the bank past the 30,000 total job cuts that executives targeted when they started the process.

Bank of America had about 288,000 employees when the plan was announced. The bank has about 15,000 employees in Charlotte.

Thompson told reporters that the companywide headcount numbers will continue to fall as the bank shutters branches and reduces the number of delinquent loans it manages. He said there is not specific target the bank is trying to reach.

“We have areas where we need to take expenses out,” Thompson said ‘As some of those came out, they will result in people no longer doing that activity.”

Bank of America now has about 5,350 branches, down from about 6,000 at its peak. The bank plans to reduce the number to about 5,000 by the end of next year.

The number of delinquent loans at Bank of America fell to about 500,000 in the second quarter, down from more than 700,000 the quarter before. Executives had earlier said the goal was to have the number below 400,000 by the end of the year. The new target is 375,000.

All that has taken about $1 billion out of the bank’s quarterly expenses since the start of Project New BAC. Executives are shooting to cut another $1 billion by the end of next year.

"I’ve been saying for a while that that’s probably the most important thing for them, and they really did a good job in this quarter," Sinegal, the Morningstar analyst, said. "But they still need to take a lot out. Can they keep going at this pace?"

No extraordinary events

Bank of America’s earnings were also notable in that there were no significant announcements made in conjunction with the report.

In the first quarter, Bank of America’s profits increased but the bank missed estimates in a period marked by a new $500 million settlement to resolve class-action lawsuits over mortgage backed securities issued by Countrywide Financial Corp. Bank of America acquired the subprime lender in 2008.

The quarter before the bank had a $13 billion settlement with Fannie Mae, the government-sponsored mortgage giant, and the federal government. And before that it was $2.4 billion to settle a shareholder suit over the bank’s 2009 acquisition of Merrill Lynch.

Staff writer Deon Roberts contributed.

Dunn: 704-358-5235 Twitter: @andrew_dunn
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