Bank of America Corp. (BAC:US)’s trading operations may underperform other firms sometimes because the second-biggest U.S. lender takes less risk, Chief Executive Officer Brian T. Moynihan said.
Income at the global markets division, overseen by co-Chief Operating Officer Thomas K. Montag, 56, fell 20 percent to $1.39 billion in the first quarter, excluding accounting charges. Revenue from sales and trading fell 13 percent to $4.5 billion, compared with the $5 billion projection of David Trone, an analyst at JMP Securities LLC in New York.
“If you look at our VAR, and our risk-taking, we’re keeping it balanced relative to the rest of the company,” Moynihan, 53, said today in a conference call, referring to value-at-risk, a measure of potential trading losses. “We may not roar as much as some people might, because this is one of the many businesses we have and we drive it for the benefit of the investing customers and also the issuing customers.”
Lenders have leaned on trading and investment banking to bolster results as the slow economy and new curbs on fees crimped revenue from consumer divisions. Risks taken by traders have drawn extra scrutiny from regulators after JPMorgan Chase & Co. (JPM:US)’s $6.2 billion loss last year on derivatives in the “London Whale” episode.
Past quarters (BAC:US) at Bank of America, based in Charlotte, North Carolina, have been buttressed by operations gained with the takeover of Merrill Lynch & Co. during the financial crisis.
“Merrill is going to be the bright spot for Bank of America in the future,” Chris Whalen, managing director at Carrington Investment Services LLC, an asset manager in Greenwich, Connecticut, said in an interview. “Imagine what these numbers would look like without Merrill.”
Bank of America’s companywide revenue, adjusted for accounting items, dropped 8.4 percent to $23.9 billion in the first three months of this year.
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