Bank of America Beats Analyst Estimates

Bank of America Corp. posted its quarterly earnings report on Monday with profit results topping analyst expectations.

The second largest U.S. bank by assets reported a high profit in each of its four main businesses as bond-trading revenue rallied more than estimates, amid quarterly earnings that were pulled back down by unrelenting low interest rates.

BAC shares, which had initially topped 19% this year, gained 3 cents to $13.69 in New York.

North Carolina-based lender The Charlotte announced a net income decline of 21% at $4.23 billion, or 36 cents a share for the second quarter, compared with $5.13 billion or 45 cents a share in the same period last year. The latest results comprised 6 cents a share in market-related charges.

Surveyed analysts from Reuters and Bloomberg had an average estimate of 33 cents per share.

Revenue tumbled 2.4% to $20.4 billion from $21.96 billion in 2015. Adjusted revenue was $20.6 billion, as analysts estimated $20.41 billion.

Meanwhile, shares climbed 0.4% pre-market. Global wealth-management profit added 7.9% to $722 million.

Net interest income dropped a steep 12% to $9.21 billion from $10.46 billion last year.

Not including accounting adjustment, trading revenue inched up 12% to $2.7 billion from $3.32 billion in the second quarter of 2015. From $2.14 billion in 2015, bond, currency and commodity trading revenue grew 22% to $2.62 billion. On the other hand, stock revenue dropped 7.6% to $1.09 billion from 2015’s $1.18 billion.

The quarterly earnings result put BAC the third large U.S. financial institution that has beat Q2 profit estimates, following JP Morgan Chase and Citigroup the prior week. JP Morgan Chase & Co. unveiled a 23% gain in trading revenue, and Citigroup Inc. revealed a 15% addition.

Goldman Sachs is anticipated to report its earnings on Tuesday and Morgan Stanley on Wednesday.

Cutting Expenses, Improving Profit

CEO Brian Moynihan has directed his attention on cutting expenses while continuously low interest rates drag revenue and profit. These low U.S. interest rates particularly hurt the bank due to its large base of U.S. deposits, and the Federal Reserve doesn’t give any hints to raise rates anytime given the uncertainty brought by last month’s Brexit vote.

Analysts have questioned whether more drastic measures are needed besides cutting costs. In April, Moynihan said after reporting Q1 results, which showed better than expect cost reductions, that “there’s a lot more to do.”

The bank cut costs 3.3% to $13.49 billion compared with 2015, the lowest since the Q4 2008. However, the lower expenses are partially due to the bank no longer spending much on servicing troubled mortgages. Previously last week, the bank closed the business segment it created in 2011 to house delinquent mortgage loans, distancing itself from financial crisis troubles.

The efficiency ratio was 65.43%, lower around 10% points from the previous quarter, but higher than the low 60s goal that the CEO has established.

Chief Operating Officer Thomas Montag issued a law to trading and investment-banking managers this year to reduce costs, sources said earlier this year.

Moynihan spent most of his term struggling with legal costs connected to the previous CEO’s acquisitions of Countrywide Financial Corp. and Merrill Lynch & Co. The CEO, who has led BAC for six and a half years, is working to improve earnings, shareholder returns and the bank’s stock price. However, this goal is made harder due to declining long-term bond yields.

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