(Bloomberg) -- Bank of America Corp. reported its highest quarterly net interest income in at least a decade as the lender reaps the benefits of the Federal Reserve’s interest-rate hikes, and debt traders beat analysts’ estimates.
Most Read from Bloomberg
NATO-China Tension Over Ukraine Flares at Conference in Iceland
Russia Hits Ukrainian Capital Kyiv With Kamikaze Drones
Pound and UK Bonds Rally; Stocks, Futures Advance: Markets Wrap
The Time to Buy the Dip Is Fast Approaching — for One Country
NII, a key source of revenue for the bank, rose 24% to $13.8 billion in the third quarter on higher rates and loan growth. Analysts had expected a roughly 23% increase for NII, the revenue the bank collects from loan payments minus what it pays depositors. Higher loan revenue combined with an increase in trading revenue helped earnings beat analysts’ expectations.
“We continued to see strong organic client growth across our businesses, with increased client activity helping to drive revenue up by 8%,” Chief Executive Officer Brian Moynihan said in a statement Monday. “Our US consumer clients remained resilient with strong, although slower growing, spending levels and still maintained elevated deposit amounts.”
The results offer another look at how Wall Street fared through a choppy quarter marked by consumer strength, capital-markets weakness and a gloomy economic outlook. Last week, JPMorgan Chase & Co., Morgan Stanley, Citigroup Inc. and Wells Fargo & Co. all posted gains in net interest income, with some raising their NII forecasts for the rest of the year.
Shares of Charlotte, North Carolina-based Bank of America, which were down 29% this year as of Friday, rose 2.9% to $32.63 at 6:56 a.m. in early New York trading.
The lender’s non-interest expenses rose 6% from a year earlier to $15.3 billion. Costs have been a focal point for investors this year after executives said they expect them to drop in future quarters.
The bank’s traders beat estimates, with bond-trading revenue rising 27% to $2.55 billion and equity trading down 4% to $1.54 billion. The third quarter saw dramatic market swings tied to interest-rate hikes, surging inflation, recession fears and Russia’s war in Ukraine.
Investment-banking revenue fell 46%, better than the 47% drop analysts were expecting, as the same market tumult that drove trading up also led to muted dealmaking. Fees for advising on mergers and acquisitions declined 34%, and revenue from equity and debt issuance dropped 76% and 34%, respectively.
The company’s loan balances rose to $1.03 trillion at the end of the third quarter, up 12% from a year earlier and slightly less than analysts’ estimates of roughly $1.04 trillion. Lending has been a key focus for investors, with government-stimulus payments undercutting borrowing by companies and consumers during the pandemic, and rising interest rates making loans costlier.
Also in Bank of America’s third-quarter results:
Net income fell 7.9% to $7.08 billion, or 81 cents a share. Analysts expected 78 cents a share, the average analyst estimate in a Bloomberg survey.
Companywide revenue rose 7.6% to $24.5 billion, more than analysts’ estimates of $23.6 billion.
Bank of America increased provisions for credit losses by $898 million. That follows a $523 million buildup in the previous three months.
Client balances in the Merrill Lynch Wealth Management business fell 13% to $2.71 trillion.
Most Read from Bloomberg Businessweek
A Digital Drive to Reform the $11 Trillion Global Gold Market
This Is What the Gas Station of the Future Will Look Like
Exxon’s Exodus: Employees Have Finally Had Enough of Its Toxic Culture
Coming Soon on Netflix: A New Netflix
America Is Unleashing Its Economic Arsenal
©2022 Bloomberg L.P.
