- `There's a lot more to do,' CEO tells analysts on call
- Expenses dropped 6.4% in first quarter as revenue fell 6.7%
Bank of America Corp. sees more room for cost cuts after bigger-than expected reductions in the first quarter helped blunt declines in profit and revenue, sending the stock higher for a fifth straight day.
“There’s a lot more to do,” Chief Executive Officer Brian Moynihan said Thursday on a conference call with analysts.
Expenses dropped 6.4 percent to $14.8 billion, below the $15.1 billion predicted by Matthew Burnell, an analyst at Wells Fargo & Co., who said the results “showed solid expense management.” Lower costs helped mitigate a 6.7 percent drop in revenue for the quarter.
Bank of America cut more than 10,000 jobs in 2015, and Moynihan has said he will eliminate more this year as the industry gets squeezed by sluggish trading, low interest rates and rising losses on loans to energy companies. The firm’s efficiency ratio, which measures how much costs consume revenue, was 75 percent in the quarter, worse than rivals including Wells Fargo & Co., which was 59 percent for the period.
The shares climbed 17 cents to $13.96 at 10:46 a.m. in New York. They had declined 18 percent this year through Wednesday, the worst performance in the 24-company KBW Bank Index.
“These stocks had so much bad news priced into them, any sign of progress is welcomed,” said Shannon Stemm, an analyst at Edward Jones & Co. in St. Louis. “There’s opportunity on the expense side.”
Even with the cost reductions, Bank of America’s profit missed analysts’ estimates as trading and underwriting revenue dropped and energy loans soured. Net income at the second-biggest U.S. bank fell 13 percent to $2.68 billion, or 21 cents a share, from $3.1 billion, or 25 cents, a year earlier, according to a statement. Adjusted earnings per share were 20 cents, 1 cent less than the average estimate of analysts surveyed by Bloomberg.
Wells Fargo, the third-biggest bank by assets, also reported a slide in first-quarter profit on Thursday as the San Francisco-based firm set aside more money to cover losses from lending to energy companies. On Wednesday, JPMorgan Chase & Co. posted profit that beat Wall Street estimates as the largest U.S. lender slashed bankers’ pay and reported a decline in trading revenue that was less than most analysts predicted.
Moynihan, 56, spent the first half-decade of his tenure wrestling with legal costs tied to his predecessor’s acquisitions of Countrywide Financial Corp. and Merrill Lynch & Co. His attempt to bolster revenue has been hamstrung by low interest rates and rising costs from energy loans that went bad as oil prices plunged.