BAC Bank of America Corporation

By Rachel Louise Ensign 

U.S. consumers propelled Bank of America Corp.'s profit in the latest quarter, though the bank warned it could take a hit from any Federal Reserve rate cuts.

The Charlotte, N.C.-based bank, the second-largest in the U.S. by assets, posted a profit of $7.35 billion, an 8% increase from the $6.78 billion a year earlier. Per share, earnings were 74 cents. Analysts polled by FactSet had expected 71 cents per share.

Second-quarter revenue was $23.08 billion, up from $22.55 billion a year ago.

Other lenders including JPMorgan Chase & Co. and Citigroup Inc. posted earnings this week that also showed strong consumer spending and borrowing but some weakness in corporate activity.

Bank of America's earnings followed that same pattern: profit was up in consumer banking and wealth management, but down in its global banking and markets units that cater to corporate clients.

Chief Executive Brian Moynihan said on a call with analysts that the bank saw solid consumer activity in the quarter, but also noticed business confidence slip a bit. Some companies were affected by the continuing trade battles between the U.S. and its trading partners, he said.

Higher interest rates have boosted banks' performance since the Fed started raising them in late 2015. That is because banks were able to charge borrowers more interest without having to significantly increase payouts to depositors.

But now the Fed is signaling that it will move in the other direction and cut interest rates as soon as this month, clouding the outlook for banks' lending businesses.

Net interest margin, a key metric of lending profitability, fell to 2.44% from 2.51% in the prior quarter.

Bank of America managed to keep a lid on interest-rate increases to customers in the second quarter. The bank paid 0.77% on U.S. interest-bearing deposits in the period, compared with 0.73% in the first quarter.

Net interest income, or the difference between what the bank makes from loans or investments and the interest paid to depositors, rose 3% from a year earlier but fell about 1.5% from the prior quarter. Executives said lower long-term rates and any Fed rate cuts would cut into net interest income growth this year.

Loans at Bank of America were up 3% from a year earlier, while deposits rose 5% over that period. Expenses were roughly flat.

Bank of America, like other big banks, felt the effects of quiet markets in the second quarter. Trading revenue fell about 10%.

PNC Financial Services Group Inc. and U.S. Bancorp, regional banks with big consumer businesses, also reported higher profits on Wednesday.

Write to Rachel Louise Ensign at rachel.ensign@wsj.com

(END) Dow Jones Newswires

July 17, 2019 11:54 ET (15:54 GMT)

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