Bank of America, the parent company of Merrill Lynch, reported profits of $3.1 billion, or $0.27 per share, on $29.2 billion of revenues in the second quarter of 2010 vs. profits of $3.2 billion, or $0.33 per share, on $32.8 billion of revenues in the same year-ago period.
Its shares (BAC) traded down more than 8.5%, around $14, on above-average volume Friday, July 16.
"The tone on the Bank of America earnings call was overwhelmingly negative," said Richard Bove of Rochdale Securities in a phone interview.
Executives, Bove notes, didn't outline how the bank will respond to new financial-reform regulations that are expected to negatively impact retail banking and other fees – though they certainly will do something. For instance, fees on retail-bank accounts and merchant services could go up, he says, but not fees in the capital- markets and wealth-management units.
MERRILL LYNCH
BofA's wealth-management operations reported higher asset-management fees and brokerage income in the most-recent quarter than since early 2009. These operations include Merrill Lynch and U.S. Trust.
"Second-quarter earnings of $0.27, vs. $0.33, beat our $0.24 estimate, helped by gains from asset sales," said Matthew Albrecht, an equity analyst with Standard & Poor's, in a research note. (He maintains a buy rating on the stock.)
"Revenues fell, reflecting weak mortgage demand and a decline in capital markets activity, and BAC's loan portfolio continues to shrink. Non-performing loans and new delinquencies declined, allowing BAC to release loan loss reserves," he explained.
BofA's wealth-management unit had $2.24 billion in fees and brokerage income in the second quarter of 2010, which topped $2.15 billion in the first quarter and $2 billion in the same year-ago period. Total client assets, however, fell about 9% from the first quarter, which the company says was a result of market volatility and the sale of Columbia Management in May.
Merrill Lynch had $1.7 billion in fees and brokerage income in the second quarter vs. $1.5 billion a year ago and $1.6 billion in the first quarter.
