Brian Moynihan, CEO of Bank of America
Heidi Gutmann | CNBC
Bank of America beat estimates for third-quarter profit on Tuesday due to stronger-than-expected interest income.
Here’s what the company reported:
- Earnings per share: 90 cents versus expected estimate of 82 cents from LSEG, formerly known as Refinitiv
- Revenue: $25.32 billion vs. expected $25.14 billion
Profit rose 10% to $7.8 billion, or 90 cents per share, from $7.1 billion, or 81 cents per share, a year earlier, the Charlotte, North Carolina-based bank said in a statement release. Revenue rose 2.9% to $25.32 billion, beating the LSEG estimate.
Bank of America said interest income rose 4% to $14.4 billion, about $300 million more than analysts expected, driven by higher interest rates and loan growth.
CEO Brian Moynihan said the bank continued to attract customers despite economic pressures. While retail deposits fell 8% in the quarter, the segment saw revenue rise 6% to $10.5 billion, according to the company.
“We did this in a healthy but slowing economy, where U.S. consumer spending was still above last year but continued to slow,” he said in an earnings release.
Bank of America should be one of the biggest beneficiaries of higher interest rates this year. Instead, the company’s shares posted the worst performance among major banks in 2023. That’s because the lender under Moynihan invested in low-yield, long-dated securities during the Covid pandemic. These securities lost value as interest rates rose.
That makes Bank of America more sensitive to the recent rise in 10-year Treasury yields than its peers — and more similar to some regional banks that also maintain underwater bonds. Bank of America recorded more than $100 billion in paper losses on bonds Mid-year.
The situation has put pressure on the bank’s net interest income (NII), a key metric that analysts will be watching this quarter. In July, the bank’s CFO Alistair Borthwick confirmed his previous forecast that NII would be about $57 billion in 2023.
Shares of Bank of America rose about 1% in premarket trading on Tuesday. The stock had fallen 18% this year through Monday, lagging its rival’s 10% rise JPMorgan Chase.
Last week, JPMorgan, Wells Fargo and Citigroup each beat third-quarter profit expectations, helped by better-than-expected credit costs. Morgan Stanley The results are scheduled to be published on Wednesday.
This story is developing. Please check back for updates.