Bank of America Misses Estimates, Shares Slide Pre-Market

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Bank of America
The company logo of the Bank of America and Merrill Lynch is displayed at its office in Hong Kong, March 8, 2013.

U.S. banking behemoth Bank of America (NYSE: BAC [FREE Stock Trend Analysis]) reported first quarter results early Wednesday that missed analyst estimates and shares slid in the pre-market.

For the first quarter of 2013, Bank of America reported earnings per share of $0.20 on adjusted revenue of $23.8 billion. Analysts were expecting Bank of America to report earnings per share of $0.23 on revenue of $23.5 billion. Revenue was driven mostly by lower than expected provisions for losses on loans.

In the quarter, the bank reported annual deposit growth of five percent to $1.1 trillion. Also, Bank of America reported that mortgage production rose 57 percent from the same period a year ago to $24 billion and consumer credit losses fell to a five-year low.

Looking at the commercial business, commercial loans grew 17 percent from the same period a year ago to $367 billion. Bank of America retained its number two global ranking in investment banking fees in the quarter and the company's project New BAC cost cutting initiative led to non-interest expense falling $1.0 billion.

Net interest margin was 2.43 percent in the first quarter of 2013, compared to 2.35 percent in the fourth quarter of 2012 and 2.51 percent in the first quarter of 2012. Net interest income, on an adjusted basis, totaled $10.9 billion in the first quarter of 2013, compared to $10.6 billion in the fourth quarter of 2012 and $11.1 billion in the first quarter of 2012.

The improvement from the fourth quarter of 2012 was driven by the favorable market-related impact of lower premium amortization expense of $340 million, higher commercial loan balances, lower average long-term debt, and lower rates paid on deposits, partially offset by lower consumer loan balances and yields, and the impact of two fewer days in the quarter.

The company's Basel I Tier 1 capital ratio rose to 10.58 percent in the quarter, up from a pro-forma 10.38 percent in the same period a year ago. Also, on a Basel III comparison, the company's Tier 1 capital ratio rose to 9.42 percent from 9.25 percent in the same period a year ago.

"Our strategy of connecting our customers to all we can do for them is working," said Chief Executive Officer Brian Moynihan. "Solid increases in loan growth to small businesses and middle-market companies, four straight quarters of steady growth in mortgage originations, record earnings in wealth management, and another quarter near the top in investment banking fees show we are balanced, focused and moving forward."

"There were many examples of progress this quarter," said Chief Financial Officer Bruce Thompson. "We reduced noninterest expense by nearly $1 billion year-over-year, and credit costs continued to decline. Our relentless focus on capital, liquidity, and expense reduction enables us to be in position to return excess capital to investors through the previously announced common stock repurchase program and preferred stock redemptions."

Bank of America shares fell 0.65 percent pre-market to $12.20. Shares closed Tuesday at $12.28 after gaining over 2 percent in the session.

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