(Bloomberg) – Bank of America Corp. reported its highest quarterly net interest income in at least a decade as lenders benefited from Federal Reserve rate hikes and debt traders beat analyst estimates. accumulate.
NII, a major source of revenue for the bank, rose 24% to $13.8 billion in the third quarter on the back of higher interest rates and loan growth. Analysts had expected a gain of about 23% for NII, the revenue a bank derives from loan payments minus the amount it pays depositors. Higher loan revenue combined with an increase in transaction revenue helped earnings beat analyst expectations.
“We continue to see strong organic customer growth across our businesses, with increased customer activity driving an 8% increase in revenue,” said CEO Brian Moynihan. know in a statement Monday. “Our U.S. consumer remains resilient to strong spending, despite slower growth and high deposits.”
The results provide another look at how Wall Street weathered a volatile quarter marked by consumer strength, capital market weakness and a dismal economic outlook. Last week, JPMorgan Chase & Co., Morgan Stanley, Citigroup Inc. and Wells Fargo & Co. Both posted increased net interest income, with some raising their NII forecasts for the rest of the year.
Shares of Bank of Charlotte, based in North Carolina, US rose 4.6% to $33.16 as of 9:37 a.m. in New York. They are down 26% this year, compared with a 23% drop in the KBW Banks Index.
Lenders’ non-interest expenses rose 6% from a year earlier to $15.3 billion. Expenses have come into focus for investors this year after executives said they expect them to fall in future quarters. Chief Financial Officer Alastair Borthwick said in a conference call with analysts, Bank of America expects full-year costs to be around $61 billion, slightly above the $60 billion it sees expected at the beginning of the year.
The bank’s traders beat estimates, with revenue from bond trading rising 27% to $2.55 billion and equities trading down 4% to $1.54 billion. Q3 saw strong market volatility related to interest rate hikes, rising inflation, recession fears and Russia’s war in Ukraine.
Investment banking revenue fell 46%, better than the 47% drop expected by analysts, as the very market turmoil that spurred trading up also resulted in trading being muted. Advisory fees on mergers and acquisitions decreased by 34%, revenue from issuance of shares and debt decreased by 76% and 34%, respectively.
Despite the downturn, the bank has no plans to cut jobs in its investment banking division “during this period,” Borthwick said.
The company’s loan balance grew to $1.03 trillion at the end of the third quarter, up 12% from a year earlier and slightly below analyst estimates of around 1.04 trillion. billion USD. Lending is a key focus for investors, with government-stimulated payments curtailing corporate and consumer borrowing during the pandemic, and rising interest rates making loans worse. more expensive.
Also in Bank of America’s Q3 results:
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Net income fell 7.9% to $7.08 billion, or 81 cents a share. Analysts expect 78 cents a share, the median estimate of analysts in a Bloomberg survey.
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Company-wide revenue rose 7.6% to $24.5 billion, more than analyst estimates of $23.6 billion.
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Bank of America increased its provision for credit losses to $898 million. This follows $523 million in the previous three months.
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Client balances in the Merrill Lynch Wealth Management business fell 13% to $2.71 trillion.
(Update with shares in fifth paragraph, CFO’s comment in sixth. An earlier story corrected the terms in the penultimate bullet point.)
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