Bank of America profit drops on lower interest income, outlook lifts shares

Bank of America Inc.’s second-quarter profit fell on lower interest income from loans and an increase in provisions for potential credit losses, but the bank’s shares rose in premarket trading after it reported a better-than-expected forecast for net interest income.

Banks are spending more on deposits as interest rates are at their highest since 2007, pushing up bond yields and making alternatives such as money market funds more attractive.

The costs of preventing deposit outflows are reducing the profits banks make from the higher interest rates they charge borrowers.

Net interest income, or NII, the difference between the profits banks make on loans and the amount they pay out on deposits, fell 3% to $13.7 billion in the second quarter. Provisions for credit losses rose to $1.5 billion from $1.1 billion a year earlier.

“The strength and profitability of our core consumer banking business is complemented by growth and profitability in our global markets, global banking and wealth management businesses,” Chief Executive Officer Brian Moynihan said in a statement on Tuesday.

Goldman Sachs profits surge on strong debt underwriting, bond trading

The second-largest U.S. bank said in a statement that it earned $6.9 billion, or 83 cents a share, for the quarter ended June 30, up from $7.4 billion, or 88 cents a share, a year earlier.

The bank now expects fourth-quarter net operating profit of $14.5 billion, above LSEG’s forecast of $14.4 billion, thanks in part to headwinds from repricing of mortgage and auto loans.

The bank’s shares rose 2.2% to $42.80 and are up 24.4% this year, outperforming rivals JPMorgan Chase & Co. and Wells Fargo & Co.

Investment Banking

Investment banks are raking in more underwriting fees as capital markets recover, and a resilient U.S. economy has encouraged companies in recent months to raise capital by selling stock and issuing debt.

Mergers and acquisitions are also gaining momentum, driving up advisory fees for investment banks. Bank of America Corp.’s investment banking fees rose 29% to $1.6 billion, in line with peers.

Second-quarter earnings outlook is bullish for stocks: Christine Short

But the division faced tough year-over-year comparisons with its peers: Bank of America’s investment banking fees rose 7% in the second quarter of 2023, while JPMorgan and Citigroup reported declines.

BofA’s underwriting revenue rose 32% in the second quarter of 2024, while syndication fees jumped 77%.

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The company’s asset management and investment administration division also saw revenue increase 6%, and client balances grew 10% to a record high of more than $4 trillion.