Bank of America swings to profit in third quarter

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By DEON ROBERTS, droberts@charlotteobserver.com


Bank of America said Wednesday it made $4.5 billion in profit in the third quarter, compared with a loss a year ago when large legal costs weighed on its results.

The Charlotte-based bank posted a loss of $232 million in the third quarter last year, a period in which Bank of America was hammered by legal costs from a $16.65 billion Justice Department settlement that lower its earnings by $5.3 billion before taxes. Bank of America views that settlement as a milestone, because it resolved its most substantial mortgage-related legal matter lingering since the financial crisis.

But CEO Brian Moynihan is still under pressure from investors who want an increase in the bank’s share price and dividend, which are below pre-crisis levels but have rebounded at some of its large peer banks.

Erik Oja, an analyst at S&P Capital IQ, said a key question among Bank of America’s shareholders remains when the second-largest U.S. bank by assets will pay more than a common dividend of 5 cents a quarter.

“That would make the stock a lot more attractive,” he said.

Before the crisis, the bank paid 64 cents a quarter.

Wednesday will mark the first time new Chief Financial Officer Paul Donofrio will conduct a Bank of America quarterly earnings call, set for later in the morning. Donofrio has been CFO since August, replacing Bruce Thompson, who surprised analysts and investors when he announced in July his plans to leave the bank.

Oja, of S&P Capital IQ, said analysts will be paying close attention to Donofrio’s first call to see whether he will have a good rapport with them.

“It's very difficult to establish a good rapport with the analyst community,” Oja said. “I think with such a complex bank, that's very difficult to do.”

Bank of America became the second of the biggest U.S. banks to report third-quarter results.

On Tuesday, JPMorgan Chase & Co. said it made profit of $6.8 billion in the quarter, up 22 percent from a year ago. But the nation’s largest lender by assets also posted a roughly 6 percent decline in revenue, in part from a slump in trading.

San Francisco’s Wells Fargo is also expected to report its third-quarter results later Wednesday morning.

Deon Roberts: 704-358-5248, @DeonERoberts