Bank Of America CEO Brian Moynihan is interviewed by Jack Otter during the Barron’s Roundtable at Fox Business Network Studios on January 09, 2020 in New York.
Ioan Lamparski Getty Images
Bank of America on Monday posted mixed second-quarter results that included the benefit of rising interest rates and about $425 million in costs related to regulatory matters.
Here are the numbers:
- Earnings: 73 cents per share. The valuation, according to Refinitiv, was 75 cents per share
- Revenue: $22.79 billion vs. $22.67 billion
Profit fell 32% to $6.25 billion, or 73 cents a share, from a year earlier as the firm took a $523 million provision for credit losses, the bank said in statement. A year ago, the bank had a profit of $1.6 billion as borrowers proved more creditworthy than expected.
Revenue rose 5.6% to $22.79 billion, beating analysts’ expectations as net interest income rose 22% to $12.4 billion on rising interest rates and loan growth.
The lender’s shares ranged between gains and losses of less than 1 percent in premarket trading.
“Solid client activity across our businesses, combined with higher interest rates, led to strong growth in net interest income and allowed us to perform well in a weakened capital markets environment,” CEO Brian Moynihan said in the release.
“Our US consumer customers remained resilient with continued strong deposit balances and spending levels. Loan growth continued across our franchise and our market teams helped clients navigate significant volatility reflecting economic uncertainty.”
Bank of America, led by Moynihan since 2010, has enjoyed a tailwind as rising interest rates and a recovery in loan growth boosted earnings. But bank stocks have tumbled this year on fears that high inflation will trigger a recession, leading to higher loan defaults.
Noninterest expenses in the quarter rose 2% from a year earlier as the firm cited about $425 million in costs related to regulatory matters. Last week, U.S. regulators announced fines against the lender totaling $225 million over its handling of unemployment benefits during the pandemic.
Like peers at Morgan Stanley and JPMorgan Chase, Bank of America reported a 47% drop in investment banking fees to $1.1 billion, just below StreetAccount’s estimate of $1.24 billion.
Fixed-income trading revenue jumped 19% to $2.3 billion and equity revenue rose 2% to $1.7 billion, both broadly in line with analysts’ expectations.
In addition, broad declines in financial assets began to show in banking results during the quarter, with Wells Fargo saying that “market conditions” forced him to publish a 576 million dollars impairment of equity interests.
JPMorgan said last week that it had written off $257 million in bridge loans for leveraged buyout customers. For its part, Bank of America CFO Alistair Borthwick said last month that the bank would likely write down $150 million on its buyout loans.
Bank of America shares had fallen 28% this year through Friday, worse than a 16% drop in KBW Bank Index.
Last week, JPMorgan and Wells Fargo reported second-quarter earnings decreases as, in the meantime, banks set aside more funds for expected loan losses Morgan Stanley disappointed after a greater than expected delay in investment banking. Citigroup was the only firm that highest expectations for earnings as it benefited from rising interest rates and strong trading results.
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