Bank of America beats analysts’ expectations despite dip in profits

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Bank of America’s profits fell in the second quarter as loan growth remained tepid and the company shored up cash for potential losses. Still, the investment banking and wealth management businesses helped boost BofA’s revenue and push its earnings per share past analysts’ forecasts.

The Charlotte, North Carolina-based company is facing similar obstacles as other megabanks, as it builds up provisions for potentially bad loans and struggles to make new ones. The $3.3 trillion-asset bank is also showing similar strengths as its peers, with investment banking fees continuing to surge.

During the second quarter, Bank of America recorded $6.9 billion in net income, down more than 6% from the same period last year. Its provision for credit losses grew to $1.5 billion, up from $1.1 billion last year, although the pace of growth in net charge-offs has started easing up.

The company reported earnings-per-share of $0.83, topping consensus expectations of $0.80. Its stock price was up less than 1% from Monday, with shares trading at $41.89 per share before the market opened Tuesday.

CEO Brian Moynihan said in a prepared statement that the “earnings power” of the bank’s consumer banking business was complemented by “the growth and profitability of our global markets, global banking and wealth management businesses.”

“Our team produced another strong quarter, serving a growing client base,” Moynihan said. “Our investments in this business are delivering for our shareholders.”

BofA returned $5.4 billion to shareholders through dividends and buybacks, Chief Financial Officer Alastair Borthwick said in a statement. During the quarter, the company announced plans for an 8% increase to its quarterly common stock dividend.

Bank of America also increased its common equity tier 1 capital ratio to 11.9%. Its newly assessed regulatory minimum ratio of 10.7%, up from 10%, takes effect on Oct. 1.

Net interest income fell to $13.7 billion, down from $14 billion the previous quarter and $14.2 billion in the second quarter of 2023, largely due to higher deposit costs, which shot up in the last year as customers sought stronger returns in the higher rate environment. Bank of America’s consumer investment assets, like certificates of deposit, hit $476 billion, up 23% from the same period last year.

Bank of America is forecasting three 25-basis-point interest rate cuts by the Federal Reserve in September, November and December.

With the expected rate cuts, the bank anticipates low single-digit percentage growth in loans and deposits, slower deposit rotation and fixed-rate asset repricing of securities at the bank. BofA is maintaining its net interest income guidance of $14.5 billion for the fourth quarter.