Oct 17 (Reuters) – Financial institution of America Corp (BAC.N) on Monday reported a smaller-than-expected 9% drop in quarterly revenue, as its curiosity earnings was bolstered by rising rates of interest that offset a hunch in funding banking.
The U.S. Federal Reserve’s aggressive transfer to tighten financial coverage this yr to tame inflation has boosted the quantity that banks can earn from charging curiosity on loans to shoppers and companies.
BofA holds a big base of client deposits, in contrast with its principal rivals, making it extra delicate to any adjustments in rates of interest.
Its web curiosity earnings jumped 24% within the third quarter, becoming a member of JPMorgan Chase & Co (JPM.N) Citigroup Inc (C.N), and Wells Fargo & Co (WFC.N), which additionally reported increased web curiosity earnings in the identical interval.
“Shoppers stay resilient,” Financial institution of America Chief Govt Officer Brian Moynihan advised analysts on a convention name.
“Shoppers proceed to spend at robust ranges,” with spending up 10% in October from the earlier yr, and they’re additionally sitting on a mountain of deposits and repaying their bank cards, he added.
Excluding objects, BofA earned 81 cents per share for the quarter ended Sept. 30, beating the common analyst estimate of 77 cents per share, in line with Refinitiv IBES knowledge.
The earnings had been a “good beat,” wrote Chris Kotowski, an analyst at Oppenheimer. “The outcomes reveal the facility of getting a robust U.S. department community.”
Shares of BofA, down about 29% up to now this yr, rose practically 6% to $33.59 alongside a broader market rally.
“BofA benefited from the next rate of interest surroundings in each the yields on the newly issued loans and simply the expansion of variety of depositors,” stated Siddharth Singhai, chief funding officer of New York-based funding agency Ironhold Capital.
The second-largest U.S. financial institution’s client enterprise reported a 12% bounce in income, helped by increased balances and an increase in rates of interest and a 9% bounce in mixed credit score and debit card spend.
The financial institution, nevertheless, added $378 million to its loan-loss reserves because it braces for a weakening financial system. That compares with a reserve launch of $1.1 billion a yr earlier.
Its international wealth and funding administration phase reported a 2% rise in income as common loans and leases grew within the quarter.
Funding banking charges at BofA fell 46% as rising concern about an financial slowdown weighed on dealmaking. That echoed outcomes throughout Wall Road, the place charges retreated from final yr’s data after demand dried up for public listings and buyouts.
Chief Monetary Officer Alastair Borthwick stated on a media name that the financial institution was happy with its headcount for now and was not planning to chop jobs within the funding banking unit regardless of a downturn in its underwriting enterprise. learn extra
The lender joins Wall Road rivals in including employees within the third quarter. JPMorgan’s headcount swelled 9% versus the earlier yr, Citigroup’s rose 8% and Morgan Stanley’s was up 11%. Wells Fargo bucked the development, trimming employees by 6%. learn extra
Financial institution of America’s leveraged mortgage losses had been decrease within the third quarter than within the second, Borthwick stated, with out specifying an quantity. Citigroup Inc (C.N) wrote down $110 million on leveraged loans within the third quarter, down from $126 million within the earlier quarter. learn extra
Financial institution of America managed to retain its high spot in international leveraged finance this yr at the same time as deal volumes within the sector shrank by 1 / 4 to $1.4 trillion, in line with knowledge from Dealogic.
It was among the many consortium of lenders that took $700 million of losses financing the buyout of Citrix Methods Inc in addition to canceled efforts to promote debt that financed Apollo International administration Inc’s (APO.N) deal to purchase belongings from Lumen Applied sciences Inc (LUMN.N). learn extra learn extra
Reporting by Mehnaz Yasmin and Manya Saini in Bengaluru and Saeed Azhar and Lananh Nguyen in New York; Further reporting by Bansari Mayur Kamdar; Modifying by Anil D’Silva
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