Why Bank of America Isn’t Up Even More After This Report

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Bank of America Corp. (NYSE: BAC) reported second-quarter financial results Tuesday before the market opened that topped estimates. The megabank said it had 46 cents in earnings per share (EPS) and $22.83 billion in revenue, compared with consensus estimates from Thomson Reuters that called for 43 cents EPS and $21.78 billion in revenue. The same period from last year had $0.41 in EPS and $20.79 billion in revenue.

Although the financial results exceeded estimates, there is still a cloud that hangs over Bank of America’s quarter. Among the red flags is  fixed-income trading, which came in at $2.254 billion and beat expectations for the quarter. However, the second-quarter result was still 14% less than the fixed-income trading number from last year’s second quarter. Management attributed this to “weaker performance in rates and emerging markets.”

Average loans and leases during the quarter totaled $915 billion, and average deposits totaled $1.257 trillion.

During this quarter, there was a return on average assets of 0.93%. Separately, the bank noted a return on average common equity of 8.0%, and return on average tangible common equity of 11.2%.

Book value per share rose 5% year over year to $24.88, while tangible book value per share increased 6% to $17.78. The Common Equity tier 1 ratio for the second quarter was 11.6%.

Brian Moynihan, chief executive officer of Bank of America, commented:

Against modest economic growth of 2%, we had one of the strongest quarters in our history. All of our businesses delivered strong results, with several setting new records. The investments we made to transform how we serve clients produced 500 basis points of operating leverage in the quarter. We achieved our 60% efficiency ratio target, and we continued to manage credit risk carefully in line with responsible growth. This supports our plan to return $17 billion in capital during the next four quarters, including a 60% increase in the quarterly common dividend.

Shares of Bank of America closed Monday at $24.02, with a consensus analyst price target of $26.39 and a 52-week range of $14.03 to $25.80. Following the release of the report, the stock was up 0.4% at $24.07 in early trading indications Tuesday.