Bank of America Corp.’s second-quarter earnings beat Wall Street expectations, sending the megabank’s stock up by more than 4% on Tuesday.
The bank’s wide exposure to the consumer sector along with a boost in its trading unit fueled its results, as well as an ability to contain costs, analysts said.
Bank of America
BAC,
stock rose 4.4% in a strong day for bank stocks, as the Financial Select SPDR ETF
XLF,
rose by 1%.
The bank’s profit for the three months ending June 30 rose to $7.4 billion, or 88 cents a share, from $6.2 billion, or 73 cents a share, in the year-ago quarter.
The bank beat the analyst forecast of 84 cents a share by four cents, according to estimates compiled by FactSet.
Bank of America’s second-quarter revenue rose 11% to $25.2 billion, ahead of the Wall Street estimate of $24.98 billion.
CEO Brian Moynihan said the bank delivered one of the strongest quarters in the company’s history, with organic client growth.
“We continue to see a healthy U.S. economy that is growing at a slower pace, with a
resilient job market,” Moynihan said.
Moynihan highlighted the bank’s sales and trading unit, as well as its investment banking business for gaining market share.
As investors adjusted their holdings to benefit from higher interest rates, the bank’s revenue from fixed income, commodities and currency rose 18% to $2.8 billion — a boost for the bank’s overall bottom line.
Overall sales and trading revenue rose 10% to $4.4 billion. Equities revenue dipped 2% to $1.6 billion.
In its consumer unit, Bank of America said it added about 157,000 net new checking accounts in the quarter, for its 18th consecutive quarter of growth. It also added 1.2 million credit card accounts.
David Fanger, an analyst with Moody’s Investors Service, said Bank of America’s results benefitted from higher interest rates, but as clients continue to seek higher yields, its net interest income is getting squeezed.
“The bank’s diversified mix of businesses and strong cost discipline offset some of this pressure, and deposit outflows slowed in the quarter,” Fanger said.
Asset quality remains mostly benign as the bank further boosted its liquidity, capital, and loan loss reserves as the economy slows and the burden of higher interest rates affects more borrowers, he said.
David Wagner, portfolio manager at Aptus Capital Advisors which owns Bank of America stock, said his firm was content to see stronger-than-expected loan growth at 2% quarter-over-quarter.
“Consistent with others, they had a decline in deposits — all told, a good quarter,” Wagner said in an email to MarketWatch.
Prior to Tuesday’s gains, Bank of America’s stock price has fallen by 11.2% in 2023, compared to a 17.8% gain by the S&P 500
SPX,
and a 1.1% gain by the Financial Select Sector SPDR ETF
XLF,
Bank of America marks the latest large bank to weather a rocky period in the banking sector with better-than-expected profits.
On Friday, JPMorgan Chase & Co.
JPM,
Citigroup Inc.
C,
and Wells Fargo & Co.
WFC,
all beat Wall Street expectations. Goldman Sachs Group Inc.
GS,
reports its second-quarter results on Wednesday.
Also Read: Morgan Stanley’s profit drops but beats expectations as stock rises
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