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Bank of America swings back to profitability


07-19-2012 11:45 BJT

Bank of America roars back! Or did it? B-of-A has slashed its way back into the black after a dismal second quarter last year. It posted a revenue jump of 66 percent, thanks in part to a sector-wide strengthening in the mortgage business.

But the bank isn’t out of the woods yet. Bank of America may have swung back into the black from a year ago, but that has less to do with a stellar performance this quarter than a very bad one the same time last year, when it took a big hit from soured mortgages. So despite B-of-A’s $2.5 billion dollar profit, America’s second-largest bank didn’t make that much money, according to Dan Alpert of Westwood Capital.

Dan Alpert, Managing Partner, Westwood Capital, said, “Basically, they’re not earning a lot of money at the top line. Meaning they’re not collecting as much interest payments as they once were. Some of that is obviously due to a reduction in interest indices but others is just a very difficult lending environment.”

Which could be said for the entire banking sector, thanks in large part to an uncertain economic climate that continues to hurt the average American. Dan Alpert, Managing Partner, Westwood Capital,said, “How is Bank of America doing relative to the average American? Well it’s about right on par—not so well, barely keeping its head above water.

And I think it’s actually a very good comparison because that’s pretty much what you can say about the American people.” And like many Americans, the bank is watching its spending very closely. During the past quarter, B-of-A slashed non-interest expenses by 26 percent to 17 billion dollars and cut more than 12,000 jobs.

But Bank of America didn’t just slash its way back to good health. Increased business had something to do with it, too. B-of-A got a big boost from an 81 percent jump in mortgage re-financings. However, mortgage-related claims left over from the bank’s takeover of mortgage lender Countrywide are still a concern.

They have dragged down the bank’s recovery and continue to spike. But despite those claims, many observers say Bank of America may be on the right track as it cleans up its balance sheet and focuses on its core businesses in consumer and wealth management.

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