BofA's Results Get Rate Boost -- WSJ
October 16 2018 - 3:02AM
Dow Jones News
By Rachel Louise Ensign
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (October 16, 2018).
Bank of America Corp. said Monday that third-quarter profit rose
32%, as higher interest rates and last year's corporate tax cut
continued to lift bank earnings.
Quarterly profit at the Charlotte, N.C., bank, the second
largest in the U.S. by assets, was $7.167 billion, compared with
$5.424 billion a year earlier. Per-share earnings were 66 cents.
Analysts polled by Refinitiv had expected 62 cents.
Revenue was $22.78 billion, from $21.84 billion a year earlier.
Analysts had expected $22.67 billion.
Earnings continue to benefit from last year's U.S. corporate tax
cut as well as interest rates. Rising rates are typically good for
banks because the companies turn a profit on the difference between
what they pay on deposits and what they collect on loans. In
September, the Federal Reserve raised its benchmark rate, the
eighth time it has done so since it started raising rates in late
2015.
Profit rose in all of the bank's major business segments but was
up the most in its retail-banking and wealth-management units.
Banks have been able to pocket most of the benefits from the
rate increases because customers aren't broadly demanding more
interest on their deposits. Bank of America paid 0.50% on U.S.
interest-bearing deposits in the third quarter, compared with 0.38%
in the second quarter. Net interest income rose 6%.
Deposits grew by nearly 5% and loans were roughly flat from a
year earlier. Loan growth has slowed down across the banking
industry since the 2016 presidential election.
Quarterly expenses fell more than 2% to $13.067 billion from
$13.394 billion a year earlier. The bank's income-tax expense fell
more than 16%.
The investment-banking unit continued to struggle, with fees
down 18% from the prior year. The unit has slipped in key
businesses including U.S. mergers this year.
"We can do better," Chief Executive Brian Moynihan said of the
business on a call with analysts Monday. The bank also attributed
some of the slide to sitting out highly leveraged debt deals over
risk concerns.
Bank of America's trading revenue fell 2.5%. Trading results
have been mixed across the industry. On Friday, Citigroup Inc. said
trading revenue was up 7%. JPMorgan Chase & Co.'s trading
revenue slipped 2%.
Bank stocks jumped early in the year as market volatility fueled
revenue on their equities-trading desks, but they have flatlined
since then. In Monday trading, Bank of America shares fell
1.9%.
Tuesday, investment banks Goldman Sachs Group Inc. and Morgan
Stanley are slated to report their quarterly results.
Write to Rachel Louise Ensign at rachel.ensign@wsj.com
(END) Dow Jones Newswires
October 16, 2018 02:47 ET (06:47 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
Bank of America (NYSE:BAC)
Historical Stock Chart
From Mar 2024 to Apr 2024
Bank of America (NYSE:BAC)
Historical Stock Chart
From Apr 2023 to Apr 2024