Interest rates

Bank of America beats earnings estimates as interest rates climb

Oct 17 (Reuters) – Bank of America Corp (BAC.N) on Monday reported a weaker-than-expected 9% decline in quarterly profit as its interest income was supported by higher interest rates that compensated for a collapse in investment banking.

The US Federal Reserve’s aggressive move to tighten monetary policy this year to keep inflation under control has increased the amount banks can earn by charging interest on consumer and business loans.

BofA holds a large base of consumer deposits, compared to its main rivals, which makes it more sensitive to any changes in interest rates.

Join now for FREE unlimited access to

Its net interest income jumped 24% in the third quarter, joining JPMorgan Chase & Co (JPM.N) Citigroup Inc (CN) and Wells Fargo & Co (WFC.N), which also reported higher net income interest during the same period. .

“Consumers remain resilient,” Bank of America Chief Executive Brian Moynihan told analysts on a conference call.

“Consumers continue to spend at high levels,” with spending up 10% in October from a year earlier, and they’re also sitting on a mountain of deposits and paying off their credit cards, it said. -he adds.

Excluding items, BofA earned 81 cents per share for the quarter ended Sept. 30, beating analysts’ average estimate of 77 cents per share, according to Refinitiv IBES data.

The gains were a “good pace,” wrote Oppenheimer analyst Chris Kotowski. “The results demonstrate the power of a strong branch network in the United States.”

BofA shares, down about 29% so far this year, rose nearly 6% to $33.59 amid a broader market rally.

“BofA has benefited from a higher interest rate environment both on yields on newly issued loans and solely on depositor growth,” said Siddharth Singhai, chief investment officer of the investment firm. New York-based Ironhold Capital.

The consumer business of the second-largest US bank saw a 12% increase in revenue, helped by higher balances and higher interest rates and a 9% rise in combined credit card spending and flow.

The bank, however, added $378 million to its loan loss reserves as it braces for a weaker economy. That compares with a release of reserves of $1.1 billion a year earlier.

Its global wealth and investment management segment saw a 2% increase in revenue as average loans and leases increased in the quarter.

Investment banking fees at BofA fell 46% as growing concerns about an economic downturn weighed on deals. That echoed results on Wall Street, where fees fell from last year’s record highs after demand dried up for public listings and buybacks. Chief Financial Officer Alastair Borthwick said on a media call that the bank was happy with its workforce for now and did not plan to cut jobs in the investment banking unit despite a slowdown in its business. subscription. Read more

The lender joins its Wall Street rivals in adding staff in the third quarter. JPMorgan’s workforce increased by 9% over the previous year, Citigroup’s by 8% and Morgan Stanley’s by 11%. Wells Fargo bucked the trend, cutting its workforce by 6%. Read more

Bank of America’s leveraged loan losses were lower in the third quarter than in the second, Borthwick said, without specifying an amount. Citigroup Inc (CN) wrote down $110 million on leveraged loans in the third quarter, down from $126 million in the prior quarter. Read more

Bank of America has managed to retain its top spot in global leveraged finance this year, even as transaction volume in the sector fell by a quarter to $1.4 trillion, according to Dealogic data. .

He was part of the consortium of lenders that suffered $700 million in losses financing the takeover of Citrix Systems Inc as well as canceled efforts to sell the debt that funded the Apollo Global Management Inc deal (APO.N) to purchase assets of Lumen Technologies Inc (LUMN.N). read more read more

Bank of America retains top spot in leveraged loan funding

Join now for FREE unlimited access to

Reporting by Mehnaz Yasmin and Manya Saini in Bengaluru and Saeed Azhar and Lananh Nguyen in New York; Additional reporting by Bansari Mayur Kamdar; Editing by Anil D’Silva

Our standards: The Thomson Reuters Trust Principles.