Bank of America, the US financial giant that twice had to be bailed out by American taxpayers, yesterday claimed it was firmly back on the road to health, thanks to several rounds of vicious cost-cutting by Brian Moynihan, its chief executive.
The company, which has one of the most extensive branch networks in the US, and which also bought the investment bank Merrill Lynch at the height of the credit crisis in 2008, posted a $2.46bn (£1.57bn) profit for the latest quarter, against a record loss of $8.83bn in the same period last year.
Shares fell in morning trading because, although profits were above expectations, revenues missed analysts' targets. Mr Moynihan has cut 20,000 jobs – about 7 per cent of the workforce – in the past 12 months, and yesterday promised another $3bn of cuts. The falling wage and bonus bill helped results even in parts of the business that are still under pressure, most notably Merrill Lynch. The bank blamed fewer big deals and weak trading activity on the economic uncertainty caused by the eurozone crisis.
Bruce Thompson, the chief financial officer, boasted: "In one year, our capital ratios have gone from being the lowest of the major US banks to among the highest, and we've maintained our strong liquidity levels even as we reduced our long-term debt by $125bn."
BofA had to take a second bailout in early 2009 because of spiralling losses at Merrill Lynch and in its US mortgage lending book. The company also acquired the country's largest sub-prime lender, Countrywide, as the credit crisis began, leaving it saddled with billions of dollars in delinquent mortgages and a morass of a legal actions against it.
Results for the three months to the end of June showed improving conditions in the mortgage business, including a surge in refinancing and lower provisions for bad loans. It set aside $1.77bn for bad loans, its lowest provision since the first quarter of 2007.Reuse content