(Bloomberg) -- Bank of America Corp. climbed to a two-year high after reporting trading and investment-banking results that topped analysts’ estimates and gave a forecast for net interest income, its biggest source of revenue, that also exceeded expectations.
The firm expects NII on a fully taxable-equivalent basis to increase to about $14.5 billion in the fourth quarter, according to a presentation Tuesday, better than the $14.3 billion analysts were estimating. Equities trading and underwriting fees also surpassed expectations.
“The strength and earnings power of our leading consumer-banking business is complemented by the growth and profitability of our global markets, global banking, and wealth-management businesses,” Chief Executive Officer Brian Moynihan said in a statement.
Bank of America’s results offer another look at how US consumers and businesses are faring as the Federal Reserve leaves borrowing costs higher for longer than analysts had previously predicted. Lenders’ balance sheets have remained resilient amid elevated interest rates, geopolitical tensions and the looming November US election.
NII in the second quarter of $13.7 billion fell short of analysts’ $13.8 billion estimate. Unlike that figure, the bank’s forecast for fourth-quarter NII was provided on a fully taxable equivalent basis.
The miss echoes similar reports last week from JPMorgan Chase & Co. and Wells Fargo & Co. Both reported NII that missed analysts’ estimates, with executives pointing to higher-than-expected costs. The results show how, after higher rates fueled profits for years, that tailwind is now under pressure as big banks battle muted loan demand and face pressure from customers to pay out more for deposits.
While NII is still feeling the effects of higher interest rates, “our services more than made up for that,” Chief Financial Officer Alastair Borthwick said on a call with media.
The bank said earlier this year that the second-quarter NII would probably be a “trough” for 2024.
Shares of Charlotte, North Carolina-based Bank of America climbed 3.6% to $43.39 at 9:40 a.m. in New York, the highest level on an intraday basis since March 30, 2022. The advance pushed this year’s gain to 29%.
‘Constructive’ Outlook
Revenue from equities trading jumped almost 20% to $1.94 billion. Fixed-income, currencies and commodities traders missed estimates, with a 1% decrease from a year earlier.
It was a record quarter for equities traders, Borthwick said. The entire markets division, which is led by Jim DeMare, has “done a good job over the past several years with the investments we chose to make in that business,” including people and technology, Borthwick said. The outlook for sales and trading is “constructive,” he said, as the interest-rate environment settles and geopolitical tensions around the world persist.
In the other core Wall Street unit, a rebound in dealmaking drove investment-banking fees up 28%, above expectations. Beats in debt and equity underwriting, up 47% and 24% respectively, more than offset advisory fees that came in below estimates.
The company’s loan balances rose to $1.06 trillion at the end of the second quarter, up from a year earlier and higher than analysts’ estimates of $1.05 trillion. Lending has been a key focus for investors, with high interest rates making borrowing more costly.
Bank of America’s non-interest expenses also rose modestly, climbing 1.7% from a year earlier to $16.31 billion. Charges and costs have been another focal point for investors, with persistent inflation putting pressure on spending. Analysts had expected a 1.6% increase to $16.30 billion.
Deposits fell 1.8% from the first quarter to $1.91 trillion. Compared with a year earlier, deposits rose 1.8%.
(Updates shares in 10th paragraph.)
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