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By Dan Freed and Sruthi Shankar

July 18 (Reuters) - Bank of America Corp reported a higher-than-expected quarterly profit on strength in its consumer bank and cost cuts that are beginning to bear fruit after years of branch closures, staff cuts and efforts to reduce technology and paper-related expenses.

Chief Executive Officer Brian Moynihan spoke glowingly of a broad turnaround in the consumer business that began in 2009, calling its $2 billion in quarterly profit a "milestone" on a call with analysts on Tuesday.

In the midst of the Great Recession, the unit had 6,000 financial centers, 100,000 employees, two-thirds the amount of deposits and little in the way of digital banking capabilities. Regulatory changes put into place following the 2008 financial crisis soon began to curtail revenue, as did strategic decisions like cutting back on business generated from third parties.

The business recently has been benefiting from the cost cuts as well as improved technology, growth in deposits and a focus on higher-quality borrowers, Moynihan said.

In the second quarter, the division managed to increase deposits at a lower cost and use those cheaper funds to fuel loan growth, helping it to record a higher profit than any other unit.

Overall, Bank of America hit a target of spending 60 cents for every dollar of revenue it produces, down from 63 cents a year earlier. Investors have been watching that metric closely as a sign of how efficiently the bank is run.

Bank of America, the second-largest U.S. lender by assets, is working to cut annual operating expenses to $53 billion next year.

Consumer banking helped Bank of America deliver net income of $4.9 billion, or 46 cents per share, up 11 percent from the year-ago period. Analysts had been expecting 43 cents, on average, according to Thomson Reuters I/B/E/S.

The bank's total revenue of $23.07 billion also beat the average analyst estimate of $21.78 billion.

"This was a good quarter all around for BofA," said Evercore ISI analyst Glenn Schorr. "You really have to look hard to find a few issues to talk about."

Moynihan and Chief Financial Officer Paul Donofrio both characterized the second quarter as one of the best in the bank's history.

But its stock was down 1.1 percent at $23.75 at midday, following a 8.4 percent year-to-date rise through Monday's close.

Even as big banks have reported better results, investors have been disappointed that profits are not growing faster. Last week, shares of JPMorgan Chase & Co, Wells Fargo & Co and Citigroup Inc each fell after beating analysts' estimates, as did Goldman Sachs Group Inc on Tuesday.