B of A earns $6.2 billion in third quarter on accounting gains

NEW YORK — Bank of America earned $6.2 billion in the third quarter on accounting gains and the sale of a stake in a Chinese bank, which offset lower revenue and income in its credit card, real estate and investment banking businesses.

In the same quarter a year ago, B of A lost $7.3 billion.

Bank of America also is no longer the largest bank in the nation by assets, which fell to $2.21 trillion in the quarter. The Charlotte, N.C., bank ceded the bragging rights to rival JPMorgan Chase, which reported total assets of $2.28 trillion.

The slimming down reflects Bank of America's strategy of cutting costs and selling off businesses that don't fit into its simpler banking model. CEO Brian Moynihan said Tuesday that he had begun the process of a "strategic transformation of the company."

The income included accounting gains of $4.5 billion and $1.7 billion, both related to drops in the value of its debt. When the price of the bank's debt falls, the bank could theoretically buy it back at a lower cost. Accounting rules require that an income gain be recorded when that happens.

Bank of America gained $3.6 billion from selling its stake in China Construction Bank and recorded a loss in its private equity business of $2.2 billion as the value of its investments fell.

The bank also announced 30,000 job cuts in the quarter as part of an initiative to reduce expenses. Its goal is to reduce expenses by $5 billion a year in the next three years.

Bank of America's investment banking and trading business reported a net loss of $302 million, compared with net income of $1.5 billion in the year-ago quarter. Revenue declined 26 percent to $5.2 billion. Fixed income, currency and commodity sales fell by $3.2 billion, while equity trading declined by $201 million. Investment banking fees fell 21 percent to $1.1 billion.

Bank of America's results are considered a proxy for the health of the U.S. consumer because the bank serves about half of all American households. The consumer business results showed that Americans were still holding back spending and demand for loans was low.

The bank's consumer real estate business reported a loss of $1.1 billion, while revenue declined 22 percent to $2.8 billion. The bank said it wrote fewer real estate loans due to lower demand.

One of the largest credit card issuers, Bank of America's revenue from the division dropped 16 percent to $4.5 billion. Customers used less credit than last year, leading to lower income for the bank.

The bank set aside less money for losses as more Americans got their financial houses in order and paid their bills on time. Bank of America's provision for losses from credit cards decreased $2 billion from a year ago to $1 billion.

Goldman Sachs loses $428M

Goldman Sachs, the U.S. banking industry's perpetual winner, was this past quarter's loser. The storied investment bank lost $428 million in the third quarter, driven by sharp drops in underwriting and trading revenue along with souring investments in stocks, bonds and other holdings. The loss announced Tuesday, worse than analysts expected, marked just the second time that Goldman has posted a quarterly loss since going public in 1999.

B of A earns $6.2 billion in third quarter on accounting gains 10/18/11 [Last modified: Tuesday, October 18, 2011 9:37pm]

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