Bank of America revenue tops expectations as lender benefits from higher interest rates

Bank of America on Monday said second-quarter results profited from increasing interest costs, yet benefit endured a shot from about $425 million in costs attached to regulatory issues.

This is the thing the organization detailed contrasted and what Wall Street was anticipating, based on a survey of a study of analysts by Refinitiv:

Earnings per share:

78 cents adjusted vs. 75 cents a share expected

Revenue:

$22.79 billion vs. $22.67 billion expected

Benefit dropped 32% to $6.25 billion, or 73 cents a share, from a year sooner as the firm took a $523 million provision for credit losses. A year prior, the bank had a $1.6 billion advantage as borrowers demonstrated more creditworthy than expected.

Barring the effect of the regulatory costs, the bank procured 78 cents a share, which was higher than analysts had anticipated.

Income climbed 5.6% to $22.79 billion, pushing out analysts’ expectations, as net interest pay flooded 22% to $12.4 billion on increasing financing costs and loan growth.

Shares of the lender fell under 1% in premarket trading.

“Solid client activity across our businesses, coupled with higher interest rates, drove strong net interest income growth and allowed us to perform well in a weakened capital markets environment,” CEO Brian Moynihan said in the release.

“Our U.S. consumer clients remained resilient with continued strong deposit balances and spending levels. Loan growth continued across our franchise and our markets teams helped clients navigate significant volatility reflecting economic uncertainty.”

Bank of America, led by Moynihan beginning around 2010, has delighted in tailwinds as increasing interest rates and a rebound in loan growth have boosted income. Yet, bank stocks have been hammered for the current year in the midst of worries that high inflation will spark a recession, which would prompt higher loan defaults.

Net interest pay could move by $900 million or $1 billion in the second from last quarter, CFO Alastair Borthwick told analysts Monday during a conference call.

Noninterest costs in the quarter rose 2% from a year sooner, as the firm referred to about $425 million in costs attached to regulatory issues. Generally, 50% of that figure was attached to fines announced last week adding up to $225 million over how the bank dealt with unemployment benefits during the pandemic; the rest has to do with an industrywide probe into exchanging personnel utilizing messaging apps.

Like peers at Morgan Stanley and JPMorgan Chase, Bank of America saw investment banking fees plunge 47% to $1.1 billion, just below the $1.24 billion StreetAccount estimate.

Fixed pay trading revenue bounced 19% to $2.3 billion and equities income rose 2% to $1.7 billion, the two basically matching analysts’ expectations.

Besides, expansive downfalls across monetary resources have started to appear in bank brings about the quarter, with Wells Fargo saying that “market conditions” forced it to post a $576 million hindrance on equity holdings. JPMorgan said last week it had a $257 million write-down on bridge loans for leveraged buyout clients.

On Monday, Bank of America cited “mark-to-market losses related to leveraged finance positions” yet didn’t quickly uncover a figure for the losses. Last month, Borthwick said that the bank will probably post a $150 million write-down on its buyout loans.

Bank of America shares have fallen 28% this year through Friday, more terrible than the 16% downfall of the KBW Bank Index.

Last week, JPMorgan and Wells Fargo posted second-quarter benefit declines as the banks put away more funds for anticipated loan losses, while Morgan Stanley was disappointed after a bigger-than-expected slowdown in investment banking. Citigroup beat expectations for income as it profited from increasing rates areas of strength and results.