Bank of America's Earnings, Revenue Grow More Than Expected -- 3rd Update
July 18 2017 - 8:17AM
Dow Jones News
By Rachel Louise Ensign
Bank of America Corp. said its second-quarter profit climbed 10%
as the bank continued to pocket gains from Federal Reserve rate
hikes.
Quarterly profit at the Charlotte, N.C.-based bank was $5.27
billion, compared with $4.78 billion a year ago. Per share,
earnings were 46 cents. Analysts had expected 43 cents a share.
Second-quarter revenue was $22.83 billion, up from $21.29
billion a year ago. On an adjusted basis, revenue was $23.07
billion, compared with analysts' expectations of $21.78
billion.
Bank of America's large base of U.S. deposits and rate-sensitive
mortgage securities makes it particularly poised to benefit from an
uptick in interest rates, which recently started rising after years
of record lows.
The bank's net interest income rose 8.6% from the year-ago
period to $10.99 billion, helped by the fact that it still hasn't
started to pay significantly higher rates to depositors. But it
fell slightly from the first quarter. The rate the bank paid on
U.S. interest-bearing deposits was 0.11%, compared to 0.09% in the
prior quarter. The Federal Reserve raised short-term interest
rates, which influence the rate the bank earns on loans and
securities, twice so far in 2017.
Bank of America shares have rallied of late, climbing 41% since
the November election. The initial share-price gains after Donald
Trump's surprise victory have been sustained as the lighter
regulatory touch investors hoped for has started to materialize.
Short-term interest rates have also kept moving higher with the
jobs picture strengthening, aiding the bank's results.
In late June, Bank of America got Federal Reserve approval for a
large increase in its dividend and stock buybacks. Since then, the
bank's stock has regularly traded above its book value, a level it
never reached between the financial crisis and the start of
2017.
But the lender, the second largest U.S. bank by assets, faced
challenges in the second quarter. Trading revenue at Bank of
America, excluding an accounting adjustment, fell 9% to $3.37
billion from $3.7 billion in the second quarter of last year. The
drop was, however, less than some analysts predicted. Similar
factors weighed on earnings reports from J.P. Morgan Chase &
Co. and other big lenders that reported their earnings on
Friday.
Loans at the bank were up 1.5% from a year earlier. Loan growth
has slowed down across the banking industry, though there's no
consensus as to why.
Investment banking fees rose 8.8% from a year earlier.
Quarterly expenses rose 1.7% to $13.73 billion, from $13.49
billion a year ago. Chief Executive Brian Moynihan has made cost
cutting a key tenet of his business strategy, and last year he
promised to cut another $5 billion in annual expenses by 2018.
Shares moved 0.6% lower in premarket trading.
Write to Rachel Louise Ensign at rachel.ensign@wsj.com
(END) Dow Jones Newswires
July 18, 2017 08:02 ET (12:02 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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