Bank of America profit jumps on boost from interest income, investment banking

BANK of America’s (BofA) profit rose nearly 20 per cent in the second quarter as it earned more from customers’ loan payments, while its investment banking business fared better than expected.

The bank reported a 7 per cent rise in investment banking fees to US$1.2 billion. That contrasts with peers whose earnings suffered from a dealmaking drought that has persisted for months.

Some industry executives held out hope, saying they had seen early signs of recovery in parts of those businesses.

JPMorgan Chase’s chief financial officer, Jeremy Barnum, highlighted “green shoots” in trading and investment banking in the bank’s earnings last week, but said it was too early to call a trend.

BofA shares rose nearly 1 per cent in premarket trading after the results. The stock is down more than 11 per cent so far this year, till the previous close.

The lender, alongside rivals JPMorgan Chase and Wells Fargo, earned a windfall from charging clients higher interest rates as the Federal Reserve raised borrowing costs to rein in stubborn inflation.

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BofA’s net interest income (NII) rose 14 per cent to US$14.2 billion in the second quarter.

“We continue to see a healthy US economy that is growing at a slower pace, with a resilient job market,” CEO Brian Moynihan said in a statement, echoing comments from his peers.

The financial health of consumers underpins BofA’s consumer banking unit, whose revenue rose 15 per cent to US$10.5 billion.

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However, banks are grappling with stress in their commercial real estate lending businesses, particularly office loan portfolios, which are taking a hit from higher financing costs and a permanent shift towards remote work.

To account for a gloomy backdrop, provision for credit losses rose US$602 million to US$1.1 billion in the quarter.

Deposits at US banks have become a focus for analysts and investors in recent months after regional bank failures in March prompted the biggest bout of banking turmoil since the 2008 financial crisis.

Average deposit balances fell US$18 billion, or 1 per cent, from the prior quarter to US$1.9 trillion.

Net income applicable to common shareholders rose to US$7.10 billion, or 88 US cents per diluted share, for the three months ended Jun 30, compared with US$5.93 billion, or 73 US cents per diluted share, a year earlier, the second-largest US bank reported on Tuesday. REUTERS