Revenues decline across segments
As discussed in the first part of this series, Bank of America’s (BAC) second-quarter adjusted revenues declined year-over-year. The decline was felt across all four of its main segments:
- Consumer Banking
- GWIM (Global Wealth and Investment Management)
- Global Banking
- Global Markets
For more on this topic, read Bank of America’s six operating segments.
The above graph shows the revenue decline across Bank of America’s segments. The Consumer Banking segment’s net income increased during the quarter, despite lower revenues. A year-over-year decline in net interest income drove the segment’s revenue decline. The segment’s service charges on deposits, too, declined, compared to the same quarter a year ago.
At the same time, higher card and mortgage banking income drove the segment’s non-interest income up by 2% year-over-year. Reduced expenses were the main factor behind the improvement. The segment’s non-interest expenses declined by 4% year-over-year.
Mortgage banking income improves
A part of the Bank of America’s Consumer Banking segment, mortgage banking income grew by 8% year-over-year. First mortgage originations increased by 44% and home equity originations increased by 23% year-over-year. The strong mortgage pipeline at the end of the first quarter supported this growth. The bank also benefitted from good hedge results from mortgage servicing rights and an absence of litigation expenses.
J.P. Morgan (JPM) reported a 21% decline in mortgage banking revenues in the second quarter of 2015. Mortgage lender Wells Fargo (WFC) also reported a 1% decline in the quarter. Citigroup (C) reported its earnings on July 16.
The banking sector makes up 37% of the Financial Select Sector SPDR Fund (XLF).
Bank of America’s investment banking revenues declined by 6% year-over-year. But after a particularly strong 2Q14 for the bank, this decline isn’t shocking. While advisory fees were up and debt underwriting stable, it was equity underwriting that drove revenues down.