Bank of America’s quarterly profit gets boost from tax cuts
Bank of America said it made $6.8 billion in profit in the second quarter, up about 33 percent from the same period last year, as the Charlotte-based company continues to get a lift from new cuts to corporate taxes.
The bank’s revenue fell 1 percent from a year ago, when results were helped by the sale of its non-U.S. credit card business. Its profit in that quarter was $5.1 billion.
In a statement, CEO Brian Moynihan noted the bank grew loans and deposits in the quarter and generated more net new households in its Merrill Lynch unit, among other accomplishments.
But cost-cutting was another factor.
Moynihan, who took over the bank in 2010, has remained focused on chipping away at expenses. Under previously announced plans, the bank is pushing to lower annual noninterest expenses to about $53 billion by the end of 2018.
In the quarter, the bank said noninterest expenses, a category that includes labor costs, declined 5 percent in the quarter.
That came as its employment continues to fall, although at a slower pace than in previous years. The bank on Monday counted 208,000 employees, down about 1 percent from a year ago, as the number of non-sales professionals fell. The decline was offset by growth in primary sales professionals, the bank said.
Bank of America has continued to emphasize that amid the cost-cutting it is investing heavily in areas such as new mobile-banking services for customers.
On Monday, Moynihan noted the bank has begun a project to spend an additional $500 million in technology over the next several quarters.
In discussing the spending initiative, he cited the benefits the company is getting from the tax cuts passed by Congress in December. Those cuts slashed what companies pay on their profits from 35 percent to 21 percent.
In the quarter, Bank of America’s income tax expense fell about 43 percent from a year ago.
In addition to lower taxes, industry results have been buoyed by rising interest rates, which have led banks to slap consumers with higher interest on loans while being slower to pay more for some deposits.
The average rate Bank of America charged on all consumer loans, such as credit cards and home equity loans, was 4.92 percent in the quarter, up from 4.71 percent in the same quarter last year.
Meanwhile, the average rate it paid on U.S. deposits in savings accounts was at .01 percent in the quarter — unchanged from a year ago.
Bank of America is the latest large U.S. bank to report financial results for the quarter.
On Friday, San Francisco-based Wells Fargo and New York’s JPMorgan Chase and Citigroup kicked off earnings season for big banks.
Wells Fargo, which continues to recover from a slew of scandals, reported $5.2 billion in profit, down from $5.9 billion in the same quarter of 2017. Among other things that were a drag on its results, Wells accrued $114 million in expenses to refund wealth-management customers it says it may have overcharged during the past seven years.
JPMorgan said it made profit of $8.3 billion, up from $7 billion a year earlier.
Citigroup reported profit of $4.5 billion, up from $3.9 billion.
This story was originally published July 16, 2018 at 7:12 AM.