DS News - HSBC

56 BANK OF AMERICA: ONE FOR THE RECORD BOOKS Bank of America (BOA) released its second-quarter financial earnings via an industry standard conference call last month with CEO Brian Moynihan and CFO Paul Donofrio delivering the remarks. e bank reported a net income of $5.3 billion, which was a 10 percent increase. Earnings per share also increased at a rate of 12 percent, stopping at $0.46 per share. ese numbers are in comparison to previously reported net income of $4.8 billion and an EPS of $0.41. Revenue was also on the rise at a rate of 7 percent, jumping from $21.3 billion to $22.8 billion. Net interest income was reported to be $11.0 billion, an increase of 9 percent, which, according to the bank, is a reflection of the Fed's increased interest rates and loan growth. Noninterest income was $11.8 billion, an increase of 6 percent. BOA attributes this to higher investment banking fees and the sale of the non-U.S. consumer credit card business. In the realm if consumer banking, total active users on the bank's mobile app jumped to 22.9 million, an increase of 13 percent, and Merrill Edge brokerage assets were up 21 percent. Loans, deposits, and net income were all up, at $18.6 billion, $56.3 billion, and $2 billion, respectively. "Against modest economic growth of 2 percent, we had one of the strongest quarters in our history. All of our businesses delivered strong results, with several setting new records," said Brian Moynihan, CEO of Bank of America. "e investments we made to transform how we serve clients produced 500 basis points of operating leverage in the quarter. We achieved our 60 percent efficiency ratio target, and we continued to manage credit risk carefully in line with responsible growth. is supports our plan to return $17 billion in capital during the next four quarters, including a 60 percent increase in the quarterly common dividend." THE HOME EQUITY PROBLEM FOR GENERATION X ere is a disparity with home equity between Gen Xers and millennials, according to a July 2017 report released by Zillow—which says that millennials and Gen Xers have similar median loan-to-value ratios on their mortgages. And the reason for this similarity, they say? e timing each generation got into the housing market in relation to the housing bust in the mid 2000s. Many Gen Xers were just beginning to purchase their homes in the years or months preceding the housing crash, which means they were hit the hardest when prices plummeted. Zillow estimates that homes lost 22.9 percent of their value on average between April 2007 and December 2011. Other generations that had been in the housing market for longer, like the baby boomers and the silent generation, had built up enough equity in their home to sustain the crash. Most millennials (64.2 percent) have entered the housing market in the past five years, which means they weren't around when the market crashed, and subsequently entered as home prices were rising. If Gen Xers bought their house before the crash, and lost a good percentage of their equity, they would be just getting back to their original prices as millennials entered. Certain metros were hit harder than others in the crash. For example, Las Vegas home values fell 62 percent between peak and trough, meaning that many millennials have more equity than their Gen X brethren. Similarly, median LTV ratio for millennials is far more favorable than it is to Gen Xers. In terms of high equity, the Silent Generation is the generation with the highest number of LTVs under 10, (11.8 percent), followed by baby boomers (6.1 percent). Gen X is further behind at 1.3 percent, and millennials are close at 0.3 percent. Zillow's data shows that only 36.7 percent of all homeowners have a LTV of 0.

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