BofA Investment Bankers, Traders Help Earnings Top Estimates
(Bloomberg) -- Bank of America Corp.’s Wall Street operations performed better than expected as the company reaped the benefits of volatile markets while net interest income topped analysts’ estimates.
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Revenue from equity and fixed income, currencies and commodities trading rose 12% to $4.93 billion in the third quarter, the company said in a statement Tuesday. Investment banking also outperformed expectations, a sign that the long-awaiting rebound in dealmaking is taking hold. That helped Bank of America top analysts’ estimates for per-share earnings.
“We’ve got a good pipeline in investment banking” and the bank’s sales and trading unit aims to report another quarter of year-over-year growth, Chief Financial Officer Alastair Borthwick said on a conference call with reporters. Customers are reassured by less-volatile interest rates, he said. “We are encouraged generally with our clients’ behavior.”
The second-largest US bank said that net interest income, a key source of revenue for the company, fell 2.9% to almost $14 billion. Analysts had expected a 3.4% drop for NII, the revenue collected from loan payments minus what depositors are paid.
Investment-banking revenue rose 15%, faring better than analysts expected amid renewed strength in dealmaking. Fees for advising on mergers and acquisitions fell 14%, less than the almost 24% decline analysts had expected. Revenue from equity and debt issuance increased 16% and 37%, respectively.
Bank of America’s results offer another look at how US consumers and businesses are faring as the Federal Reserve starts lowering borrowing costs for the first time in almost half a decade. Lenders’ balance sheets overall have remained resilient, though uncertainties remain, with geopolitical tensions and the US presidential election on the horizon.
Last week, JPMorgan Chase & Co. and Wells Fargo & Co. both reported earnings that beat analysts’ estimates, with executives pointing to a surge in investment banking and trading boosting results. Both banks said that, despite pressure to net interest income, they expect they are nearing a trough in the closely watched figure.
Bank of America expects NII on a fully taxable-equivalent basis to increase to about $14.3 billion or more in the fourth quarter, executives said on a conference call with analysts. That adjusted number was $14.1 billion in the third quarter.
Shares of Charlotte, North Carolina-based Bank of America rose 1.7% to $42.64 at 9:35 a.m. in New York and have gained 26% this year.
The bank’s loan balances rose to $1.08 trillion at the end of the third quarter, up 2.5% from a year earlier and more than analysts’ estimates of $1.07 trillion. Lending has been a key focus for investors, with high interest rates making borrowing costlier and rate cuts expected to spur more lending activity.
Bank of America’s non-interest expenses also rose 4% from a year earlier to almost $16.5 billion, driven by revenue-related expenses and investments in the franchise, including people and technology, the firm said in a presentation. Charges and costs have been another focal point for investors, with persistent inflation putting pressure on spending. Analysts had expected a 4.1% increase.
Net income totaled $6.9 billion, or 81 cents a share, down almost 12% from a year earlier but better than the nearly 16% drop analysts had expected.
(Updates with CFO’s comments in third paragraph, shares in ninth. A previous version of the story corrected a loan-balance figure in the 10th paragraph.)
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