Brian Moynihan’s efforts to boost Bank of America Corp. profit through cost cutting finally got some help from interest rates. The lender posted the highest net income in six years as the chief executive officer cut expenses more than forecast and net interest income rose to the highest since 2011.
Moynihan and his executives have promised for years that the bank will boost revenue from lending whenever interest rates rise. After disappointing investors in the second quarter with a surprise drop, the bank exceeded expectations in the latest period.
Net interest income, which makes up about half of the Charlotte, North Carolina-based firm’s revenue, rose as the Federal Reserve has raised interest rates three times since December.
During his seven years as CEO, Moynihan has worked to reduce legal costs that dogged the firm after it acquired Merrill Lynch & Co. and troubled mortgage lender Countrywide Financial Inc. The lender has spent $70 billion on legal bills since the financial crisis — more than any other U.S. bank — including $30 billion on mortgage putbacks.
“After $20 billion in expenses in the last five years taken out of this company, there is no team that is more focused on this than the team that works for me,” Moynihan said on a call with analysts.
Moynihan’s quest to right Bank of America drew praise this month from Berkshire Hathaway Inc.’s Warren Buffett, the firm’s largest shareholder. Buffett said in a CNBC interview that the CEO has done “a fantastic job.” Berkshire Hathaway took a $11.5 billion investment gain earlier this year when it converted preferred shares into common stock.
Total revenue rose less than 1 percent to $21.8 billion, slightly below analysts’ expectations, weighed down by a decline in mortgage-banking fees. Expenses dropped 2.5 percent to $13.1 billion, the bank said Friday in a statement, compared with estimates of $13.3 billion. The lender reduced staff by 0.5 percent from the previous quarter to 209,839.
Revenue from trading stocks and bonds declined 15 percent from a year earlier to $3.15 billion — in line with what the lender predicted last month. Fixed-income contributed the most to the slump, falling 22 percent to $2.17 billion. Equities trading, which is about half the size of fixed income, rose 2.5 percent to $984 million.