Bank of America's Bragging Rights


The nation's second largest bank by assets, Bank of America still has a long way to go relative to its peers before returning to a normalized level of earnings. But that doesn't mean the Charlotte, N.C.-based bank can't have its moment in the sun.

By at least one measure, Bank of America ended up having the best quarter among all of the nation's largest lenders -- Citigroup was excluded from the analysis given its nonanalogous business model. The measure I'm referring to here is the year-over-year growth in its pretax, preprovision profit, excluding unusual items.

This is a mouthful, so let's break it down. It consists of a bank's earnings before taxes, less any type of unusual and nonrecurring items (like, say, JPMorgan Chase's $9.3 billion litigation provision), and less loan-loss provisions. The net result is a cleaner picture of how well a lender's core operations performed from one time period to the next.

On a year-over-year basis, Bank of America's PTPPP expanded by 15%. PNC Financial came in second by this measure with a growth rate of 4%. Beyond these two, all of the other major lenders saw core profitability fall as a result of lower mortgage-banking income and a depressed fixed-income trading environment.

Does this mean Bank of America will soon return to fighting form? Far from it, as it still has an enormous expense base to chip away at, as well as a handful of outstanding legal cases to resolve. What it does mean, however, is that the bank is making considerable progress in the right direction.

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John Maxfield owns shares of Bank of America. The Motley Fool recommends Bank of America. The Motley Fool owns shares of Bank of America, JPMorgan Chase, and PNC Financial Services. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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