Bank of America said Wednesday that its second-quarter profits soared, welcome news at a bank where recent quarters often have been walloped by mortgage-related problems.
The earnings growth came largely because the bank cut costs and set aside less money for potentially troubled loans. While earnings popped 70 percent, revenue was up just 3 percent.
The results beat analysts’ expectations. Bank of America’s stock jumped nearly 3 percent to $14.31.
Bank of America, the country’s second-biggest bank by assets, has for several years been slogging through problems left over from its 2008 acquisition of mortgage lender Countrywide Financial, a purchase that has brought lawsuits, regulatory investigations and quarterly losses.
In the second quarter, Bank of America slashed expenses about 6 percent compared with a year ago. It also cut about 18,300 jobs, or nearly 7 percent of its workforce. The bank also has been closing branches, trimming about 260 locations, or 5 percent of its total, over the year.
Overall, Bank of America earned $3.6 billion in the quarter after payments to preferred shareholders, up from $2.1 billion a year ago. Revenue was $22.9 billion after stripping out one-time charges, up from $22.2 billion a year ago.
A federal judge has ruled that the U.S. government may pursue its $5 billion civil fraud lawsuit accusing Standard & Poor’s of misleading investors by inflating credit ratings.
U.S. District Judge David Carter in Santa Ana, Calif., said late Tuesday that the government had made its case sufficiently to support its fraud claims, denying S&P’s motion to dismiss the lawsuit.
Fourteen U.S. states and the District of Columbia are suing S&P, a unit of McGraw Hill Financial, over similar claims in the U.S. District Court in Manhattan.
The Feb. 4 lawsuit accused S&P of not being objective in its ratings from 2004 to 2007 and inflating ratings so that it could win more fees from issuers and bankers who pay for its ratings.
The lawsuit outlined, in what the judge called “comprehensive detail,” how the largest U.S. credit-rating agency failed to downgrade its ratings for collateralized debt obligations despite “clear knowledge” that they were backed by deteriorating residential mortgage-backed securities.
S&P has argued that statements about the integrity of its ratings constitute “puffery” that cannot be a basis for the fraud lawsuit.
l The U.S. economy maintained a “modest to moderate pace” of growth in recent weeks, bolstered by industries ranging from housing to manufacturing, the Federal Reserve said Wednesday. “Residential real estate and construction activity increased at a moderate to strong pace in all reporting districts,” the Fed said in its Beige Book business survey, which is based on anecdotal reports from its 12 regional banks. “Manufacturing expanded in most districts since the previous report.”
l Former Goldman Sachs director Rajat Gupta was ordered Wednesday to pay a $13.9 million penalty and was banned from serving as an officer or director of a public company for having illegally passed corporate secrets to former hedge-fund manager Raj Rajaratnam, the Securities and Exchange Commission said. The SEC said the order was issued by U.S. District Judge Jed Rakoff, who oversaw Gupta’s related criminal trial. Gupta is appealing his June 2012 conviction and two-year prison term for having fed confidential information he learned at Goldman board meetings to Rajaratnam, a former billionaire who ran Galleon Group.
l Google must do more to allay concerns that it is blocking competitors in Web search results, the European Union’s antitrust chief said Wednesday after rivals criticized concessions it has offered as being inadequate. Google submitted proposed concessions to the European Commission in April to end a three-year probe. The company said Wednesday its proposal “clearly addresses” areas of concern.
l Intel cut its full-year revenue forecast as it adjusts to a painful contraction of personal computer sales and economic weakness in China, one of its biggest markets. Faced with slow demand, the chip-maker said it was cutting 2013 capital spending to
$11 billion, plus or minus $500 million. Intel said it expects 2013 revenue to be flat from the year before. On Wednesday, the company reported second-quarter net earnings of $2 billion, in line with expectations. That compared with $2.83 billion in the same quarter last year.
l 8:30 a.m.: Weekly jobless claims released.
l 10 a.m.: Weekly mortgage rates released.
l 10:30 a.m.: Federal Reserve Chairman Ben S. Bernanke testifies on monetary policy before the Senate banking committee.
l Earnings: Capital One Financial, Google, Microsoft, Safeway, Verizon Communications.