(Reuters) – Bank of America Corp.'s credit growth ( BAC.N ) lagged its rivals, and transaction and bond advisory fees declined in the third quarter, easing its share price by almost 3 percent. even as profit exceeded expectations.
A Bank of America Merrill Lynch sign can be seen on a building that houses its offices in Singapore. May 1
US Bank # 2 Profit Increased 35 Percent, Supported by Cost Control Investors focused on the underlying businesses.
"It was definitely a surprise when some of the other banks had credit growth that was better than expected," said R.J. Grant, Trade Director at Keefe, Bruyette & Woods.
Bank of America's total lending volume increased 0.3 percent to $ 930 billion in the third quarter compared to the same period last year. Declines in mortgages and loans to market customers offset gains in consumer finance, asset management and commercial lending.
In contrast, JPMorgan Chase & Co ( JPM.N ) reported a rise in lending by 6 percent and Citigroup Inc ( C.N ) an increase of 4 percent.
Bank of America's shares were down 2.6 percent at mid-day trade at $ 27.71.
Mergers' fees dropped 26 percent in the quarter, as did the fees for subscribing to bonds. Sales and trading sales fell 5 percent.
In a teleconference with reporters, Chief Financial Officer Paul Donofrio said Bank of America is working to repair its M & A business after losing market share. At the end of the year, Matthew Koder will head up the corporate and investment bank of Christian Meissner, who announced his intention to go last month.
"I know we can do better," Donofrio said.
Nonetheless, third-quarter earnings demonstrated the benefits of cost control introduced by Chief Executive Officer Brian Moynihan. Staff cuts, the closure of unprofitable branches, and the phasing out of old technology systems have pushed billions of dollars out of annual spending.
Lenders generally benefit from a strong US economy. Rising interest rates, lower taxes, buoyant deposits and healthy demand for credit have boosted the industry this year. Some major banks reported quarterly quarterly record profits.
Bank of America's earnings rose from $ 5 billion a year ago to $ 6.7 billion in the third quarter. Excluding special items, the bank earned 67 cents per share, according to an average analyst estimate of 62 cents per share, according to Refinitiv's I / B / E / S data.
"Overall trends continued to look strong," Citigroup analyst Keith Horowitz said in a report. "The underlying core results are not necessarily as high as the headliner number."
Sales increased 4 percent as noninterest expenses decreased 2 percent. Thanks to their efficiency efforts, Bank of America's costs have increased less than revenue over the last 15 quarters.
The bank plans to limit annual costs to approximately $ 53.5 billion by 2020, Donofrio said in a separate interview with analysts. In 2011, Moynihan first introduced an efficiency program called Project New BAC.
In the first nine months of this year, Bank of America's cost ratio was raised to $ 80 billion and its revenue was 59 percent. This compares with 57 percent at JPMorgan Chase & Co ( JPM.N ), 58 percent at Citigroup Inc ( CN ) and 65 percent at Wells Fargo & Co ( WFC ). N ).
Asked if Bank of America can get its percentage of its expense by the mid-fifties, Moynihan said, "We should push it down further."
reporting by Imani Moise of New York and Siddharth Cavale of Bengaluru; additional reporting by David Henry and Sinead Carew in New York; Editing by Anil D & # 39; Silva and Susan Thomas