Bank of America on Friday reported larger profits in the third quarter, as the Charlotte-based company further reduced its headcount and continued to slash expenses.
The bank said profits totaled $5.6 billion, an increase of 13 percent from the same period last year. It was the best performance in six years. Friday’s year-over-year improvement came as the bank grew revenues 1 percent – but also lowered its headcount by more than 1,000 in another quarter of cost-cutting, which has remained a top priority for CEO Brian Moynihan.
Executives Friday also touted how Bank of America continues to benefit from Moynihan’s ongoing focus on “responsible growth,” a strategy that has included doing more business with existing customers and operating within a certain appetite for risk.
Net income totaled 48 cents a share, beating the average estimate of 26 analysts surveyed by Bloomberg of 46 cents. In a report Friday, Barclays analyst Jason Goldberg said expenses “continued to be well controlled” but that fee income “was a tad light.”
Profits reported Friday were the highest since $6.2 billion in the third quarter of 2011. That’s in stark contrast from the financial crisis era when the bank booked quarterly losses.
“This was another strong quarter across the board for Bank of America,” Moynihan said on a conference call with analysts. He noted the bank increased average loans and deposits from a year earlier, and that loans on which borrowers have fallen behind on payments dropped to lowest levels since the first quarter of 2008.
On the expense front, the company said its workforce fell by more than 1,065, which it attributed primarily to this year’s sale of its non-U.S. consumer credit card business as well as “optimization” efforts in its consumer banking division.
It adds to the tens of thousands of jobs shed under Moynihan, who since taking over in 2010 has focused on streamlining a company that had ballooned from years of acquisitions. Moynihan signaled that employment could fall further as the bank continues to automate functions.
Chief Financial Officer Paul Donofrio, speaking to reporters on a conference call, noted headcount has been falling at a “significantly reduced” pace in recent quarters. A driver in the recent quarter’s headcount decline was the loss of summer interns, he said. Compared with the third quarter of last year, employment is down more than 2,000.
The bank has also continued to hire for positions like primary sales professionals, Donofrio said. He would not speculate how much lower headcount might fall below its current 209,839 but noted the bank will continue to “optimize.”
“It’s certainly not going to decline at the pace it’s been declining in the past,” the CFO said.
Friday’s results were helped in part by continued increases by the Federal Reserve in short-term interest rates, which affect the rate the bank makes off securities and loans.
But Bank of America also reported a slump in its trading business, noting it was coming off a strong third quarter last year. Peers Citigroup and JPMorgan Chase, who reported third-quarter results Thursday, also saw tumbles in their trading businesses.
The rise in profits at Bank of America bested that of its large peers. Citigroup said net income rose 8 percent to $4.13 billion, or $1.42 a share. At JPMorgan, net income rose 7 percent to $6.73 billion, or $1.76 a share.
Wells Fargo, which also reported Friday, said its third-quarter earnings fell 18 percent as the San Francisco-based bank set aside money for mortgage-related litigation.
In a familiar occurrence, Moynihan faced analyst questions Friday about the bank’s progress toward trimming expenses. The CEO, whose company for years was weighed down with costly legal expenses tied to the financial crisis, is now pushing to cut costs in other areas. Under a plan unveiled last year, the bank wants to lower annual noninterest expenses to $53 billion by the end of 2018.
Moynihan said the bank remains on track to meet the target. Expenses are being taken out in various ways, including by closing data centers, lowering real estate occupancy costs and reducing headcount, he said.
“It comes from everywhere,” he said. “It comes from basically applying technology and digitizing processes.”
Bank of America, which employs about 15,000 in Charlotte, has made layoffs in its headquarters city this year in areas like technology and mortgage. Moynihan said the company will hire 8,000 people in the current quarter to “maintain our headcount sort of neutral or down a bit.”
Even as it cuts jobs, the company noted Friday the headcount for workers in primary sales positions increased by more than 2,000 in the third quarter from a year ago. The bank also pointed out that it continues to invest in technology for customers, as well as in building and refurbishing branches.
Though Bank of America remains the second-largest U.S. bank by assets, federal data out this month shows JPMorgan has surpassed it as largest U.S. bank by deposits.
Asked about the drop to second place, Donofrio pointed out Bank of America’s average deposits rose 4 percent in the third quarter from a year earlier. He said the bank’s focus is on growing deposits that “will remain with us over time.”
“Our strategy is to continue to broaden and deepen relationships with our customers,” he said. “We feel great about our deposit franchise.”