- Earnings and revenue at Bank of America exceeded Wall Street forecasts.
- The bank reported interest income that was higher than expected.
- Consumer spending is still slowing down, according to CEO Brian Moynihan.
On Tuesday, Bank of America reported third-quarter profit above projections thanks to higher-than-anticipated interest income.
What the business reported is as follows:
- Earnings per share: 90 cents vs LSEG’s (previously Refinitiv’s) forecast of 82 cents
- In contrast to expectations, revenue came in at $25.32 billion.
The Charlotte, North Carolina-based bank reported a 10% increase in profit to $7.8 billion, or 90 cents per share, from $7.1 billion, or 81 cents a share, a year earlier. The amount of revenue increased by 2.9% to $25.32 billion, exceeding the LSEG prediction.
Bank of America reported that higher rates and loan growth drove an increase in interest income of 4% to $14.4 billion, or about $300 million more than analysts had predicted. Also better than anticipated, the bank’s provision for credit losses came in at $1.2 billion, falling short of the $1.3 billion expectation.
The price of Bank of America shares increased by more than 2% on Tuesday.
According to a report by Wells Fargo analyst Mike Mayo, the statistics demonstrate that Bank of America avoided significant hazards relating to loan losses and increased rates. He characterized it as an “okay quarter” that fell short of JPMorgan’s and Citigroup’s performance.
The second-largest U.S. bank by assets, according to CEO Brian Moynihan, kept expanding despite indications of a slowing economy.
Across all business lines, we added customers and accounts, according to Moynihan. consumer spending was still higher than it was last year, but still slowed down.”
“An arrow in the side”
One of the major winners of this year’s rising interest rates was expected to be Bank of America. In contrast, the stock of the corporation has underperformed its main bank rivals in 2023. This is a result of the lender investing heavily in low-yielding, long-dated securities under Moynihan during the COVID-19 epidemic.
Due to this, Bank of America is now more susceptible to the recent increase in the yield on the 10-year Treasury than its competitors and is also more comparable to other regional banks that are also holding underwater bonds.
In the third quarter, the lender’s portfolio of held-to-maturity bonds had a sharper increase in unrealized losses, totaling $131 billion. Mortgage securities were largely to blame for the losses.
UBS analyst Erika Najarian pushed management for more information on the bank during Tuesday’s conference call, saying, “Clearly, this held-to-maturity portfolio has been a thorn in the side of the stock.”
Trough NII
The circumstance has put pressure on the bank’s net interest income, or NII, a crucial indicator that analysts will be keeping an eye on this quarter. Alastair Borthwick, the bank’s CFO, confirmed in July that earlier projections for NII in 2023 were approximately $57 billion.
The “good news” regarding net interest income, according to Borthwick on Tuesday, is that it will reach a low point in the fourth quarter and then start to increase once more in the middle of 2024.
Through Monday, the price of Bank of America stock had decreased 18%, lagging behind rival JPMorgan Chase’s 10% gain.
Due in part to higher-than-anticipated credit charges, JPMorgan, Wells Fargo, and Citigroup, all reported third-quarter profits last week that exceeded expectations. Results from Morgan Stanley are expected on Wednesday.
