Bank of America Corp., the No. 2 U.S. bank, Wednesday said quarterly profit climbed a better-than-expected 10 percent, helped by surging credit card fees, investment gains and securities trading.
Third-quarter net income for the Charlotte, North Carolina-based bank rose to $4.13 billion, or $1.02 per share, from $3.76 billion, or 91 cents, a year earlier. Profit totaled $1.04 per share excluding merger costs, topping the average $1.02 estimate of analysts polled by Reuters Estimates.
Revenue rose 16 percent to $14.81 billion, beating forecasts for $14.14 billion, while noninterest expense increased 4 percent to $7.29 billion.
The bank benefited from a surge in home equity loans and borrowing by businesses, and an industry wide rebound in stock, bonds and currency trading. Several Wall Street investment banks reported big trading gains last month.
"Bank of America's results were terrific," said Stephen Berman, who helps invest $7 billion at Stein Roe Investment Counsel in New York and owns the company's shares. "Margin was stable, it had good loan growth, and it had very good income from market-sensitive parts of its investment bank."
During the quarter, Bank of America chief executive Kenneth Lewis reorganized business and investment banking. Last year he acquired FleetBoston Financial Corp., and in June he agreed to pay $35 billion for MBNA Corp..
The bank now expects in January, rather than late this year, to finishing buying MBNA. The credit card issuer on Wednesday said quarterly profit fell 1 percent to $717.9 million, or 56 cents per share. Analysts forecast 53 cents.
Asked on CNBC television if more acquisitions are possible, Lewis said, "We never say never."
Higher trading revenue helped No. 3 bank JPMorgan Chase & Co. on Wednesday report a 78 percent profit gain. Citigroup Inc., the biggest bank, reported higher profit on Monday, largely from the sale of an insurance unit.
Bank of America shares rose 16 cents to $41.73 in afternoon trading on the New York Stock Exchange. Through Tuesday, the shares had fallen 12 percent this year, compared with a 9 percent drop in the Philadelphia KBW Bank Index .
Cards, trading surge
Third-quarter fee income surged 39 percent to $6.83 billion. Card income rose 21 percent to $1.52 billion, equity investment gains tripled to $668 million, and trading account profit nearly tripled to $514 million. Mortgage banking income totaled $180 million after a year-earlier loss.
Lending income rose 2 percent to $7.97 billion, though net interest yield fell to 2.80 percent from 3.30 percent a year earlier and 2.81 percent in the second quarter.
The bank added 1.5 million credit card accounts in the third quarter, and a net 635,000 new retail checking accounts and 294,000 new savings accounts.
"There were a lot of doubters when Bank of America bought Fleet, and the bank has proven them wrong," said Wayne Bopp, an analyst at Fifth Third Asset Management in Cincinnati, Ohio, which oversees $21 billion, including the bank's shares.
Bank of America set aside $1.16 billion for bad loans, up 78 percent from a year earlier, and reserved $50 million for Hurricane Katrina. Net charge offs rose 60 percent to $1.15 billion, including $209 million for U.S. airlines.
Chief financial officer Al de Molina said he expects "meaningfully higher" credit card charge-offs this quarter, tied to a rush of bankruptcy filings ahead of tougher laws that took effect Monday.
"It's a potentially large number," de Molina said in an interview. But to the extent people filed sooner to avoid the new laws, "most investors would shrug that off," he said.
Profit rose 25 percent in consumer and small business banking profit to $1.88 billion, and 22 percent in wealth and investment management to $583 million. It fell 7 percent in business and financial services to $1.1 billion, and 8 percent in capital markets and investment banking to $434 million.
Deposits rose 6 percent to $626.5 billion, loans and leases rose 8 percent to $554.6 billion, and assets rose 17 percent to $1.25 trillion.