Bank of America’s profit climbs 10%, boosted by interest rates and loans

Revenue rose to $25.2 billion from $24.5 billion in the year-ago quarter and was slightly ahead of the FactSet consensus of $25.13 billion.

Net interest income rose 4% to $14.4 billion as the bank benefited from higher interest rates and loan growth. Analysts expected net interest income of $14.1 billion, according to FactSet consensus estimates.

Bank of America’s stock was up 1.6% Tuesday.

“Bank of America’s net interest income was lifted by revenue growth in credit cards and capital markets despite a modest rise in deposit costs, while continued reserve build is another sign of responsible growth,” said Moody’s analyst David Fanger.

Analysts have trimmed their profit only slightly from the forecast of 83 cents a share set at the start of the quarter, as Bank of America’s large consumer-banking unit benefited from a relatively strong U.S. economy and employment picture.

Chief Executive Brian Moynihan said the bank added clients and accounts “across all lines of business.”

The bank managed through a “healthy but closing economy that saw U.S. consumer spending still ahead of last year but beginning to slow,” he said.

Year-to-date payment spending for Bank of America customers rose 4% to $3.1 trillion, compared with a 12% gain for full-year 2022 and a 21% growth rate in 2021.

“As we move into October, the spending is holding at that 4% level, so growing, but growing at a pace that’s more consistent with a low-growth, low-inflation economy,” Financial Chief Alastair Borthwick said on the bank’s call with analysts.

Looking ahead, Bank of America said it expects $14 billion in net interest income in the fourth quarter, compared with the analyst estimate of $13.91 billion.

The bank expects net interest income to hover around $14 billion in the first half of 2024 and then grow modestly in the second half.

“By the time we get to the fourth quarter of 2024, we believe we can see net interest income up low single digits compared to the fourth quarter of 2023,” Borthwick said. “The good news is we believe [net interest income] will likely trough around the fourth-quarter level of $14 billion and begin to grow again in the middle of next year.”

Bank of America’s average deposit balances rose by about $1 billion from the previous quarter to $1.9 trillion, but declined by $87 billion, or 4%, from the year-ago quarter.

Global markets revenue increased by 10% to $4.9 billion, driven by higher sales and trading revenue in fixed income, currencies and equities.

The bank added 200,000 new consumer checking accounts and 1.1 million credit-card accounts.

Average loan and lease balances increased by $12 billion, or 1%, to $1 trillion, led by higher credit-card balances, the bank said.

Caught up in the bearish sentiment in the sector, Bank of America’s stock dropped 4.6% during the third quarter. In the past month, the stock has dropped 6.1%, compared with a 1.7% drop by the S&P 500
SPX.