Trading business drives B of A profits

A man rides by a Bank of America branch Pasadena, Calif.

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Kai Ryssdal: As it happens, this is earnings season on Wall Street. JPMorgan Chase announced first quarter profits Wednesday. Today, Bank of America did the same. After losing money for two consecutive quarters, B of A earned $3.2 billion over the past three months. They did it not so much with actually banking as with trading.

Marketplace's Alisa Roth explains what that is and why it matters.


Alisa Roth: B of A's commercial side is still having a hard time. The home mortgage business keeps losing money. And the bank is still writing off credit card loans, although fewer than it was. But trading revenue grew to $7 billion.

Anthony Polini is an analyst at Raymond James.

Anthony Polini: You know, why do trading profits go up at any given time? It's a function of more client activity and usually more volatility.

The trading business also tends to do better during the first quarter of the year. B of A has been focusing more attention on trading, since it bought Merrill Lynch last year. But its real strength has always been on the commercial side: business and consumer loans and banking.

Jefferson Harralson follows the bank for Keefe, Bruyette & Woods. And he says B of A's not going to suddenly shift away from that focus.

Jefferson Harralson: The trading is sort of good that it's been strong, and it's sort of a placeholder until the rest of the bank reaches its normalized earnings.

The big question for B of A is when its commercial business will start to pick up again.

Joe Morford is an analyst at RBC Capital Markets. He says there's not a lot of demand for loans right now. So getting the commercial side to grow is largely out of the bank's control.

Joe Morford: You know, a lot of it will be tied to the strength of the broader economy. So, the business is realistically likely to be fairly sluggish here in the near term.

Morford and other analysts say it'll probably be a few more quarters before the commercial side really picks up again. Until then, B of A will just have to hope the trading business can keep the profits coming in.

In New York, I'm Alisa Roth for Marketplace.

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