Bank of America’s Q1 Profit Falls (BAC)

Bank of America Corp.’s (NYSE: BAC) profit fell sharply as declining consumer banking business and an accounting charge tied to its value of its debt weighed on its both revenues and the bottom line.

Bank’s Per-share earnings dropped to 3 cents from 17 cents a year ago. Total revenue also fell 17% to $22.5 billion. However, those results include a $4.8 billion debt valuation adjustment, which does not reveal its annual financial performance.

Meanwhile, Bank of America reported earnings stood at $653 million, compared with a year-earlier profit of $2.05 billion. Notwithstanding the current debt adjustment charge, revenue still declined 2.8%. Net income edged up to $5.5 billion from $3 billion a year ago.

According to a poll conducted by Thomson Reuters, excluding the charge, BofA reported earnings stood at 31 cents a share, compared to analysts’ estimates of 12 cents per share.

BAC’s shares climbed up on early trading on Thursday; however retreated for most the morning session and stood flat at $8.92 at midday.

For the Wall Street heavyweight, some major gains came from two areas:  improved trading results and reduced costs and credit loss reserves across the entire bank.

Revenue from trading in fixed income, currency and commodities soared 10.8% to $4.1 billion–record sales for both Bank of America and Merrill Lynch, which Bank of America acquired during the financial crisis.  The rise in revenue in these areas of business comes when some other banks have lost money on it.

However, revenue from its consumer banking division- once a core business of BofA- fell sharply as consumers continue to cut spending amid fragile economic recovery. Revenue slid 12.3% to $7.4 billion and income also plunged 28.8% to $1.5 billion.

Thanks to cost-cutting initiative, the bank reduced expenses 5.6% from a year earlier and 2% from the fourth quarter, to $19 billion.

There was also an improvement in bank’s capital position. Bank’s Tier 1 capital ratio, a crucial gauge of a bank’s financial health, rose 2.05 percentage points to 13.37%. Meanwhile, bank’s total non-performing loans declined to $27.8 billion from $31.6 billion.

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Post Written By: Ed Liston Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing in his yacht.