For once, Bank of America is putting rivals Citigroup and Wells Fargo to shame. The Charlotte, N.C.-based mega-bank, which reported third-quarter earnings on Wednesday, is still only managing to eke out meager returns five years after the financial crisis. But by one important metric it’s holding up better than any of its large U.S. competitors except JPMorgan.
BofA’s pre-tax, pre-provision profit in the three months to September fell just 1.6 per cent compared to the same period last year after adjusting for one-offs and other noise, according to Citi research. That’s pretty impressive on its own, considering the summer spike in interest rates whacked mortgage lending and added pressure on revenue across Wall Street from trading fixed income, currencies and commodities.
But the bank run by Brian Moynihan bested a couple of its peers, too. Citigroup’s adjusted profit fell by almost 5 per cent, while Wells Fargo’s slumped by almost 12 per cent. That marks a rare underperformance by the San Francisco-based bank. Of course, much of it comes from the slowdown in extending home loans, in which Wells has of late enjoyed around a 30 per cent market share. It may also be a sign of Wells’ relative lack of diversity.
Nonetheless, both BofA and Citi trail their West Coast competitor by a country mile in what they provide to shareholders. Wells still managed to crank out a 14 per cent return on equity in the third quarter. Citi only managed 6.4 per cent while BofA’s languished at 4.23 per cent – though that would have risen to 6 per cent if it weren’t for a one-time tax hit in the United Kingdom. JPMorgan’s number, meanwhile, grew just over 5 per cent – after stripping out its whopping $9-billion (U.S.) legal bill, of course.
Overall, the results are a reminder that recovery is slow at BofA. The relative strength of its income, adjusted for funnies, is at least a feather in the cap for Mr. Moynihan. After years of cleaning up the mess left by predecessor Ken Lewis, he needed one. Now his progress can be properly judged.
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