Bank of America beats profit estimates on advisory fee and lending revenues
Bank of America Corp beat Wall Street estimates for quarterly profit on Wednesday as it earned more in advisory fees and its loan book expanded, easing concerns that lower interest rates would crimp growth at the second-largest U.S. bank.
The lender’s shares rose three per cent as consumer banking, BofA’s biggest business, showed strength in the face of worries over slowing economic growth and added to signs from JPMorgan and Citigroup that U.S. household finances remained healthy.
“In a moderately growing economy, we focused on driving those things that are controllable,” CEO Brian Moynihan said. “Across nearly every line of business, we were seeing strong customer activity.”
On a conference call with analysts, BofA’s top executives warned about challenges from lower interest rates and expectations of further cuts, but remained confident about meeting its earlier forecast of one-per-cent growth in full-year net interest income.
Since 2015, Wall Street’s marquee banks have benefited from higher interest rates, as they could afford to charge more interest on loans, without having to significantly raise payouts on deposits.
However, this year, markets have been buffeted by trade tensions and a weakening global economy, forcing the Federal Reserve to cut rates twice this quarter.
Bank of America is the most vulnerable among the big U.S. banks to fluctuations in interest rates because of its large deposit stock and rate-sensitive mortgage securities.
BofA took a small hit on its spread and reported a four-basispoint decrease in its interest margin to 2.41 per cent for the third quarter. But a five-per-cent growth in overall loans helped it overcome the impact of lower rates. Moreover, strong performance in investment banking and equities trading boosted total revenue.
Revenue from investment banking fees jumped 40 per cent, while consumer banking revenue rose three per cent. The bank’s equity trading business outperformed its peers with a 13-per-cent jump.
Net interest income came in higher at US$12.34 billion.
Revenue, net of interest expense, rose slightly to US$22.96 billion.
Analysts were expecting a profit of 51 cents per share and revenue of US$22.79 billion, according to IBES data from Refinitiv.