BofA plans $3bn of new cost cuts, posts 2nd-qtr profit

Bank of America Corp said it plans to slash costs by USD 3 billion annually in commercial lending, investment banking and wealth management, becoming the latest big bank to take aim at expenses in a sluggish economy.

The No. 2 U.S. bank posted second-quarter earnings of  USD 2.5 billion on Wednesday, reversing a year-earlier loss, helped by a cost-cutting program launched last year.

Expenses declined 35% to USD 17 billion, while its work force was reduced by more than 12,000 from a year earlier to 275,460.

The first phase of the cost-cutting initiative begun in 2011 was intended to save  USD 5 billion a year and eliminate 30,000 jobs by the end of 2014 in consumer banking and information technology.

The second phase aims to cut costs by USD 3 billion a year by mid-2015. It does not target a particular number of job cuts.

Second-quarter net income was USD 2.5 billion, or 19 cents a share, compared with a loss of USD 8.8 billion a year earlier, when the bank took mortgage-related and other charges totaling USD 20.7 billion.

The Charlotte, North Carolina-based bank has lagged its peers in recovering from the financial crisis, largely due to losses tied to its 2008 purchase of subprime lender Countrywide Financial.

JPMorgan Chase & Co , Wells Fargo & Co , Citigroup Inc and Goldman Sachs Group Inc in recent days all beat analysts' earnings estimates, helped by cost-cutting, stronger mortgage business and better consumer delinquency rates.

Revenue at Bank of America totaled USD 21.97 billion in the second quarter, down from USD 22.28 billion in the first quarter but up fromUSD 13.24 billion a year earlier. Banks are struggling to boost revenue amid weak demand, low interest rates and new regulations crimping fees.

The bank's provision for loan losses fell to USD 1.77 billion, its lowest level since the first quarter of 2007, compared with USD 3.26 billion a year ago.

Mortgage banking income increased only slightly from the first quarter to USD 1.66 billion but was a big improvement over a year ago, when the bank lost USD  13.2 billion as it set aside reserves to cover investor requests to buy back soured loans.

REGAINING MORTGAGE MARKET SHARE

Bank of America has been scaling back its home lending in the wake of massive Countrywide losses, but said it recaptured some market share in the second quarter.

Mortgage costs "are coming down," said Gary Townsend, president of Hill-Townsend Capital. "That is very important because that has been a huge drag over the past three years."

Bank of America's total loans fell to USD 892.3 billion from USD 902.3 billion in the first quarter as it continued to shed assets from the credit crisis. JPMorgan, Wells Fargo and Citigroup showed slight increases in total loans from the first quarter.

However, Bank of America's loans to businesses were up from a year ago to USD 267.8 billion.

The bank said it made better-than-expected progress in building capital in the quarter. Its projected Tier 1 common capital ratio under so-called Basel 3 standards reached an estimated 8.1% of risk-weighted assets. The bank had previously said it would be above 7.5% by year-end.

Bank of America shares were little changed in premarket trading, up a penny to USD 7.93.