Bank of America’s Continued Efficiency Maintains Margins

In 3Q17, Bank of America’s (BAC) non-interest expenses fell sequentially and YoY (year-over-year), reflecting strong operating efficiency. This fall was partially offset by continued investments in technology. The bank’s expenses fell to $13.1 billion in 3Q17, compared with $13.5 billion in 3Q16 and $13.7 billion in 2Q17.

Commercial banks (XLF) are focusing on reducing operating spending, targeting huge investments in technology for core banking, asset management, and trading activities in a bid to add more assets and clients. Major bankers focusing on technology include JPMorgan Chase (JPM), Citigroup (C), and Goldman Sachs (GS).

Bank of America’s personnel expenses fell to $7.5 billion from $7.7 billion in 3Q16. Its non-personnel expenses fell to $5.7 billion from $5.8 billion in 3Q16 due to lower operating spending and litigation costs.

The bank’s total headcount fell 1% to 209,800 due to consumer banking optimization and its non-US consumer card business. However, its primary sales headcount rose by 2,200 across its consumer, global banking, and wealth divisions.

Bank of America had a 60% efficiency ratio in 3Q17, lower than its ratio of 62% in 3Q16 and in line with its 2Q17 ratio. In 3Q17, the consumer banking division’s efficiency ratio improved to 51%, the asset management division’s improved to 73%, and the global banking division’s improved to 43%. However, as was expected, the global market division’s ratio deteriorated to 69%, due to lower trading activity and technology investments.