BofA’s cost-cutting drive pushes 1Q profit to record


NEW YORK • Bank of America Corp (BofA) hit a new milestone in its years-long effort to get costs under control.

First-quarter (1Q) expenses totalled about 60% of revenue, the best ratio in more than five years. That helped push profit above analysts’ estimates, and corporate tax cuts spurred earnings to a record. Net interest income got a bigger boost than expected from higher interest rates, but fixed-income trading disappointed.

CEO Brian Moynihan, who’s had the top job for eight years, spent much of that time working to free the bank from legal entanglements and other costs that weighed on the lender after the financial crisis. The tax cuts could help the bank turn more to growth initiatives, as it has laid out plans to open new branches and expand into states including Ohio.

The company, the secondlargest US bank, reported net income of US$6.92 billion (RM26.9 billion), a 30% gain over a year ago that surpassed analysts’ expectations. Total revenue rose 3.7% to US$23.3 billion, also higher than estimates , according to a statement from the bank yesterday.

“This quarter is not an anomaly,” CFO Paul Donofrio said on a conference call with reporters. “Instead, it’s the latest in a string of quarters where we’ve shown consistent improvement in financial performance.”

Part of the bank’s success in the 1Q came from trading stocks in the choppy environment traders like best. Equities revenue surged 38% to US$1.52 billion, compared to analysts’ expectations for US$1.18 billion.

Fixed-income revenue posted a surprise 13% drop to US$2.54 billion, with the bank citing weak trading in corporate bonds. Client activity was lower compared to a year ago in part because the firm sold fewer new corporate bonds, Donofrio said. He said BofA’s credit desk didn’t have any specific trading losses. The consumer business — the largest among its main four divisions — showed particular strength, with profit increasing US$800 million to US$2.7 billion as deposits and loans increased. The bank added to average loans for the 32nd consecutive quarter, Donofrio said.

Fees from credit cards rose less than 1% and the bank’s mortgage business sagged alongside other US home lenders. New mortgage production declined almost 18% to US$9.4 billion.