$2.1B charge dents Bank of America Q3 profits

Dive Brief:

Bank of America reported profit of $5.8 billion Wednesday, a drop of 19% from $7.2 billion the bank recorded in last year's comparable quarter. The bank attributed the decrease in net income to a $2.1 billion one-time impairment charge related to the end of its partnership with payment-processing company First Data.
The nation's second-largest bank reported total revenue of $22.8 billion for the quarter ending Sept. 30, up 0.4% from $22.7 billion last year.
Excluding the impairment charge, Bank of America said its profit rose 4.2% to $7.5 billion for the quarter.

Dive Insight:

The Charlotte, North Carolina-based bank announced in July that it would end its decades-long partnership with First Data to develop its own business.

Bank of America CEO Brian Moynihan said the decision to split with First Data gives the bank greater control over its services.

"Philosophically, we wanted to control our destiny to be able to provide this type of service to our clients in a much cleaner way," Moynihan told analysts during a conference call Wednesday. "The team is working with [First Data] closely to unwind the venture for the contract. But it's been a good relationship and we expect that to continue in various ways."

Despite the Federal Reserve's rate cuts this summer, Bank of America managed to grow its loans by 7% during the quarter.

As the "most asset sensitive" among the larger U.S. banks, Bank of America is especially vulnerable to interest rate cuts, Morgan Stanley analyst Betsy Graseck told CNBC.

This may lead the bank to lower guidance for the net interest income it earns, according to CNBC. The bank has already lowered its net interest income guidance twice this year.

Warren Buffett's Berkshire Hathaway Inc. appears to view Bank of America's performance as promising.

Berkshire asked the Federal Reserve this month to increase its stake in the bank above 10%, according to the The Wall Street Journal.

The Omaha, Nebraska, conglomerate typically tries not to own more than 10% of a bank to avoid additional Fed oversight, the Journal reported.

Three of Bank of America's four main business units reported profit during the third quarter.

Net income from consumer banking revenue rose 5% to $3.3 billion, while its global wealth and investment arm saw net income of $1.1 billion, an increase of 8%.

The bank's global banking unit reported net income of $2.1 billion, up 3% from last year, while profit from its global markets arm decreased 8%, to $0.8 billion.