Bank of America: The Good, The Bad, The Ugly
Bottom-line: Not a great quarter punctuated by a lot of noise.
- Bank of America (BAC) made numbers.
- Small business lending increased, the first time I have seen this at any bank in a while.
- Not sure it is good, but interesting: Home equity lines of credit actually increased???
- Like all banks, BAC seems to be controlling expenses, which means firing people.
- NPA's remained flat.
- Tax rate was higher than expected (not sure why this is).
- Margin was 3 bps lighter than consensus.
- A lot of noise, includes: MBNA transaction and $720 million gain on sale from Brazilian operations, which just happened to offset securities losses to reposition balance sheet and MBNA-related merger charge. Hmmm can anyone say managing earnings?
- Card fees were weak.
Revenue trends were mixed:
- Net income was flat versus 2Q as strong consumer and commercial loan growth were offset by NIM pressure (yet another bank with high mortgage concentration showing this trend).
- Deposit costs increasing faster than loan yields.
- A modest decline in deposit balances.
- A shift in deposit towards cds.
Charge-offs and delinquencies ticked up, which caused the card business to underperform expectations.
Bottom-line: Not a great quarter punctuated by a lot of noise. BAC is holding up better than the regionals, but had a weaker showing than both Citigroup (C) and JP Morgan (JPM). Some trends were worrisome (see Ugly).
Steve Zausner also contributed to this article.
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