Boston, MA 10/21/2013 (wallstreetpr) – Bank of America Corp (NYSE:BAC) has managed to declare better than expected quarterly results on account of cost cutting and its diversified portfolio. Other banks and financial institutions in the same space have not been so lucky. Goldman Sachs Group Inc (NYSE:GS) reported a fall in revenue by 20% in the third quarter. Goldman and other financial institutions have suffered from a slowdown in the mortgage financing business. House rates are the lowest in many years and companies were expecting the business to pick up. A survey of quarterly results of the top five banks reveals that mortgage loans fell by almost 21% as compared to the same period last year. If we take all the companies engaged in this space, the decline could be to the extent of 35%. There has been an improvement in credit quality with delinquent loans decreasing. This could be on account of the renegotiation of loans for people who were unable to pay their mortgage payments. Secondly, hedge funds and investors have purchased foreclosed homes in anticipation of rental incomes. There is a glut in the rental housing sector. New house owners may be deferring the purchases of homes in anticipation of further falls in prices and also low rentals.
Bank of America has done well on the cost cutting front. The company has laid off 3.5% of its employee strength in the last quarter. Such a step had to be taken without affecting the service levels. The bank has turned to technology to reduce transactions at its branches. Bank of America is using mobile banking services to lure its customers away from the branch and ATM transactions. Mobile banking can be used to know account balances, transfer funds from one account to another, and also to pay bills. The transactions can be conducted from anywhere at any time. Such technological advances attract the young population. They reduce the dependence on employees through reduced transactions at the branches. The bank can reduce its employee strength as well as the branch network.
