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BofA Posts Big Jump in Profits; Piper Jaffray Results Weaken

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Bank of America (BAC) reported Wednesday that its third-quarter net income rose to $2.5 billion, a jump of more than 600% from last year’s $340 million.  

The bank’s results benefited from increases in equity investment income, net interest income and investment and brokerage income, as well as improved credit quality and lower expenses. Still, it did face headwinds like lower mortgage-banking income and adjustments to deferred tax assets related to U.K. corporate income tax rate reductions.

“This quarter, we saw good loan growth, improved credit quality and record deposit balances. Our customers and clients continue to do more business with us,” said CEO Brian Moynihan, in a statement.

Nonetheless, banking analysts pointed out that BofA’s mortgage banking results fell 50% from the prior quarter, along with total servicing income. Litigation expenses were more than $1 billion in the most-recent period, up from about $470 million in Q2, according to Sterne Agee.

On the other hand, capital markets “held up better than expected at $4.3 billion,” which was down roughly 14% from the prior quarter and 6% from a year ago. Fixed-income trading declined 10% from Q2 and 20% from the same period of 2012, note analysts Todd L. Hagerman and Robert Greene.

Equities trading was “a relative bright spot,” they add, up 36% from the prior year’s period.

Global Wealth

BofA said its Global Wealth and Investment Management unit had revenue of $4.4 billion, up 8% from last year but 2% off last quarter’s results.

Asset flows were $9.7 billion, a nearly 80% year-over-year growth rate. This marks the 17th consecutive quarter of positive flows, the bank says, and the highest third-quarter level since BofA merged with Merrill Lynch.

Total GWIM client balances were $2.28 trillion, of which $1.85 trillion were held in Merrill accounts.

Merrill Lynch revenues were $3.6 billion, up close to 7% over last year but down nearly 3% from last quarter due to reduced market activity and seasonality, the bank says.

Advisor fees and commissions averaged $1.3 million for each veteran rep, and total advisor productivity was $1 million for both veteran and newer advisors.

BofA says it has a total of 15,624 advisors, down 135 from the prior quarter and 1,135 from a year ago. It also reports that is has 16,846 wealth advisor (including FAs) and 19,534 client-facing professionals across the wealth unit.

Yearly advisor productivity was $971,000 in the second quarter and $927,000 in the first.

Piper Jaffray

Piper Jaffray (PJC) said Wednesday that its third-quarter net income fell 71% on special charges and a loss from discontinued operations. Revenues improved slightly to $138.8 million.

Its Capital Markets unit included advisory services revenues of $20.2 million, up 24% and 115% compared to the third quarter of 2012 and the second quarter of 2013, respectively. Equity institutional brokerage sales were $23.0 million, a jump of 28% from last year and 7% from last quarter thanks to “improved trading performance,” the bank says.

Asset Management net revenues were $18.1 million, an increase of 11% compared with the third quarter of 2012. “Increased revenues compared to the prior year quarter were driven by higher management fees from increased assets under management (AUM) due to market appreciation,” the company said in a press release. AUM for the unit were $10.6 billion as of Sept. 30.

Check out Schwab Q3 Results Surprise Analysts; Citi Fails to Hit Estimates on ThinkAdvisor.