Expect a dividend increase from the U.S. banks: David Baskin
Bank of America Corp. beat analysts’ earnings estimates as fees climbed at the company’s dealmaking unit, boosted by a record-breaking period for mergers and acquisitions.
Investment-banking advisory fees rose 65 per cent to US$654 million in the third quarter as firms leaned on Bank of America to handle their debt and equity financing, and a combination of cheap financing for buyers and attractive valuations for sellers spurred a wave of takeovers.
“The economy continued to improve and our businesses regained the organic customer growth momentum we saw before the pandemic,” Chief Executive Officer Brian Moynihan said in a statement Thursday. “Deposit growth was strong and loan balances increased for the second consecutive quarter, leading to an improvement in net interest income even as interest rates remained low.”
Government aid programs that kept consumers and businesses afloat during the pandemic had cut into loan growth at financial firms. That trend, combined with historically low interest rates meant to bolster the economy, has weighed on the profitability of banks’ core lending businesses.
But there are signs of a turnaround. Loans and leases rose 1 per cent from the previous quarter to US$927.7 billion. That’s more than analysts’ estimates of US$923.9 billion.
Net interest income, or revenue from customer loan payments minus what the company pays depositors, rose 10 per cent to US$11.1 billion. In April, the bank forecast that NII would be about US$1 billion higher by the end of the year than the US$10.3 billion it posted in the first quarter. By the second quarter, NII had slipped slightly to US$10.2 billion.
Bank of America shares, which gained 42 per cent this year through Wednesday, advanced 2.2 per cent to US$44.10 at 7:07 a.m. in early New York trading.
Also in Bank of America’s results:
- With the risk of widespread loan defaults fading further, Bank of America released US$1.1 billion in reserves in the third quarter. That follows a US$2.2 release in the second quarter.
- Noninterest expenses were little changed at US$14.4 billion.
- Net income rose 58 per cent to US$7.7 billion, or 85 cents a share. Analysts estimated 71 cents, on average.