Bank of America's second-quarter profit jumps 63% on cost cuts Profit at Bank of America Corp. soared 63% in the second quarter as the once-troubled megabank slashed costs and put more of its mortgage problems in the rearview mirror. The strong performance by the bank, based in Charlotte, N.C., comes after Wells Fargo & Co. and JPMorgan Chase & Co. last week posted strong earnings, provoking more enthusiasm over the economy and the all-important banking sector. Beating analysts' expectations, Bank of America said it earned $4 billion, or 32 cents a share, in net income in the second quarter, up from $2.5 billion, or 19 cents, in the same period a year earlier. The company's share price rose 39 cents, or 2.8%, to close at $14.31. Because the American economy looks brighter for the rest of 2013, the bank's star should rise, executives said on a conference call with analysts. "The good news in all this is we're seeing our business is reflecting an improving economy," Chief Executive Brian T. Moynihan said. The economy continues to improve across all areas, and that benefits our company across all fronts. Nevertheless, much of the growth came outside of what analysts say are the bank's "core earnings." Instead, the bank cut costs by shutting branches and putting less money aside to cover potential loan losses. And the number of full-time employees declined 7%, from 275,460 at the end of the second quarter of 2012 to 257,158 as of June 30. Paul Miller, an analyst with FBR Capital Markets, who has a neutral rating on the bank, said that Bank of America deserves credit for cleaning up its balance sheet but that its essential business remains weak. They were good earnings. You have to give them credit where credit is due," Miller said. Are they creating economic value right now? I don't see it, but are they cleaning up their balance sheet? Bank of America has been trying to churn out more profit by pruning business segments, cutting costs and cleaning up its troubled mortgage business. The segment's net loss widened to $937 million, compared with a loss of $744 million in the same period a year earlier. For those reasons, Richard Bove, an analyst at Rafferty Capital Markets, said the bank had a lackluster quarter despite the earnings growth. But given the positive outlook for the economy, the bank's fortunes should rise. Bove said that Moynihan has essentially bet his job on the hope that he can knock $8 billion in costs out of the company over a two-year period, and that he is well on his way to hitting that target. "I am very bullish the bank is going to do what the economy is going to do," Bove said. And the economy looks strong: "Housing is up, autos are up, energy is up, healthcare is up," he said. The company made up ground in mortgage originations, saying that it now has about 5% of the mortgage market compared with less than 4% a year earlier. Mortgage originations rose 6% from the first quarter and 41% from June 2012, to hit $25 billion. But the rise in mortgage interest rates is expected to cut into the mortgage refinancing business for all banks, and Bank of America is no exception. "We do anticipate some slowdown in mortgage production resulting from recent increases in interest rates," Bruce R. Thompson, the bank's chief financial officer, told analysts.