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 City.
John Lamparsky | Getty Images
Bank of America said on Monday earnings and revenue beat expectations on better-than-expected fixed-income trading and gains in interest income, helped by choppy markets and higher rates.
Here are the numbers:
- Earnings: 81 cents vs. 77 cents per share estimated by analysts polled by Refinitiv.
- Revenue: $24.61 billion vs. $23.57 billion estimated
Bank of America said in a statement that third-quarter profit fell 8% to $7.1 billion, or 81 cents per share, as the company recorded an $898 million provision for credit losses during of the quarter. Net interest expense income jumped to $24.61 billion.
The bank’s shares rose 3.1% in premarket trading.
Bank of America, led by CEO Brian Moynihan, was expected to be a major beneficiary of the Federal Reserve’s rate hike campaign. This plays out because lenders, including Bank of America, JPMorgan Chase and Wells Fargo generate more revenue as rates rise, allowing them to generate more profit from their core business of deposit taking and lending.
“Our US consumer customers remained resilient with solid, albeit slower growing, spending levels and still maintained strong deposit amounts,” Moynihan said in the release. “Across the bank, we increased lending by 12% over the past year as we provided the financial resources needed to support our customers.”
The bank’s net interest income jumped 24% to $13.87 billion in the quarter, beating StreetAccount’s estimate of $13.6 billion, helped by higher rates in the quarter and an expanding loan portfolio.
Net interest margin, a key profitability indicator for bank investors, widened to 2.06% from 1.86% in the second quarter of this year, beating analysts’ estimate of 2.00%.
Fixed income trading revenue jumped 27% to $2.6 billion, well beating the estimate of $2.24 billion. That more than offset equity earnings which fell 4% to $1.5 billion, below the $1.61 billion estimate.
Like its Wall Street rivals, the investment bank’s revenue recorded steep declines, falling about 45% to $1.2 billion, slightly beating the estimate of $1.13 billion.
It should be noted that the evolution of the bank’s provision for credit losses showed that the company was beginning to take into account a more difficult economic outlook.
While Bank of America released $1.1 billion in reserves in the prior year period, in the third quarter the company had to build up reserves of $378 million. That, plus a 12% increase in net bad debt write-offs to $520 million in the quarter, accounted for the provision of $898 million.
Bank of America shares have fallen 29% this year through Friday, worse than the 26% drop in the KBW banking index.
Last week, JPMorgan and Wells Fargo beat third-quarter earnings and revenue expectations by generating higher-than-expected interest income. Citigroup also beat analysts’ estimates, and Morgan Stanley missed the mark as choppy markets hurt its investment management business.
This story is developing. Please check for updates.
