Bank of America Corp (NYSE: BAC) reported another quarterly earnings and revenue beat on Monday morning, topping Wall Street analyst expectations for the second quarter thanks to aggressive cost-cutting. Bank stocks have underperformed the market so far in 2018, but analysts say another solid quarter from Bank of America suggests long-term investors should be buying the dip.
Bank of America reported second-quarter earnings per share of 63 cents on revenue of $22.6 billion. Both numbers topped consensus Wall Street expectations of 57 cents and $22.3 billion, respectively. Revenue was down 1 percent compared to a year ago but would have been up 3 percent if not for a one-time boost from the sale of the company’s U.K. credit card business in the second quarter of last year.
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Bank of America once again trimmed costs by 5 percent in the second quarter, which helped the company raise profits by 33 percent to $6.8 billion.
Bank of America reported $935.8 billion in total loans, short of the $942 billion analysts has expected. Consumer Banking loans were up 7 percent to $281 million, Wealth and Investment Management loans were up 7 percent to $161 billion and Global Banking loans were up 3 percent to $355 billion.
Net interest income was up 6 percent to $11.7 billion, but net interest margin declined 0.01 percent from the first quarter to 2.38 percent.
Provision for credit losses increased $101 million to $827 million but was still well short of consensus analyst estimates of $937 million.
“Solid operating leverage and client activity drove earnings higher this quarter,” CEO Brian Moynihan says in a statement. “Responsible growth continued to deliver as a driver for every area of the company.”
BAC stock traded slightly higher on Monday morning following the report but remains down more than 3 percent year-to-date. Bank investors haven’t gotten the type of margin expansion they had hoped for from big banks given rising interest rates, but CFRA analyst Kenneth Leon says Bank of America shareholders simply need to be patient.
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“BAC is delivering consistent quarterly performance after many years of slow improvements to its capital ratios, payout levels and credit quality,” Leon says.
CFRA has a “strong buy” rating and $35 price target for BAC stock.
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Cost-Cutting Drives Earnings Beat for Bank of America Corp. (BAC) Stock originally appeared on usnews.com
