Bank of America Q3 Profit Beats Estimates on Strong Investment Banking and Trading, Net Interest Income Down 2.9% YoY
Similar to other major Wall Street banks, Bank of America's investment banking and trading business performed strongly in Q3, driving profits and revenues to exceed expectations. Although net interest income was higher than expected but declined, it still slightly exceeded the anticipated figure.
On Tuesday, before the US stock market opened, Bank of America released its Q3 financial results. Specifically:
- Total revenue was $25.49 billion, slightly exceeding the expected $25.3 billion;
- Earnings per share were $0.81, surpassing the analysts' consensus estimate of $0.77;
- Net interest income decreased by 2.9% year-over-year to $14.1 billion, but it was still slightly above the widely expected $14.06 billion.
It is worth mentioning that Bank of America's net interest income for Q3 was higher than in Q2, indicating that the trend of this key indicator is improving. The bank stated in July that net interest income would rebound in the second half of this year.
Wells Fargo analyst Mike Mayo said in a report on Tuesday that Bank of America seems to have reached the inflection point where net interest income turns to growth, although the extent of the subsequent reversal depends on interest rates.
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In terms of revenue, the decline in net interest income was offset by the growth in trading income, asset management, and investment banking fees. In the third quarter, revenue from equity and fixed income, foreign exchange, and commodities trading increased by 12% to $4.93 billion.
Looking at the business segments, investment banking performed better than expected, indicating that the long-awaited rebound in transaction business is taking hold.Sales and trading revenue increased by 12% to $4.9 billion, marking the 10th consecutive quarter of year-over-year growth, with equities business growing by 18% and fixed income, currencies, and commodities rising by 8%.
As trading activity regained momentum, the strengthening confidence in interest rate cuts stimulated clients to issue bonds and stocks, leading to an 18% increase in investment banking revenue to $1.4 billion, which exceeded analysts' expectations.
Following the release of the financial report, Bank of America's stock price rose by 3% in pre-market trading in the US, accumulating a nearly 24% increase as of Monday this year.