BofA profit beats estimates on interest income, decade high trading revenue

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Oct 17 (Reuters) – Bank of America’s (BAC.N) third quarter profits beat Wall Street estimates as it joined other big lenders in earning more on loan interest payments, while also benefiting from a better-than-expected performance in investment banking and trading. The second largest U.S. lender said the national economy and consumer spending on travel and goods were slowing but remained resilient despite rising interest rates. The bank warned that the macroeconomic outlook was uncertain and corporations continue to hold back on deals. “Our team of economists predicts a soft landing, with a trough in the middle of next year,” CEO Brian Moynihan told analysts. BofA profits climbed 10% to $7.8 billion, or 90 cents per share, beating analysts’ expectations of 82 cents, according to IBES data from LSEG. Its shares were last up 3.11% in afternoon trading, outperforming a near 1.8% rise in the S&P 500 Banks Index (.SPXBK), which tracks a basket of large-cap bank stocks. Consumer banking revenue increased 6% year-on-year to $10.5 billion, while customer spending on debit and credit cards grew 3%. Americans’ finances are beginning to flag, but delinquencies were still low compared to historical levels, the bank said. On Friday, lenders including JPMorgan Chase (JPM.N), Citigroup (C.N) and Wells Fargo (WFC.N) said U.S. consumers remain in good shape even though spending has slowed and delinquencies were rising. The country’s largest lenders have enjoyed surging net interest income (NII) as the Federal Reserve has hiked interest rates to fight inflation, allowing them to charge more on loans. Likewise, BofA said net interest income rose 4% to $14.4 billion and said fourth quarter NII should be around $14 billion, pushing its full year NII growth to 9%. Its investment banking and trading units were also a highlight. Total investment banking fees jumped by 2% to $1.2 billion, bucking an industry-wide slump. Sales and trading revenue rose 8% to $4.4 billion, its highest in more than a decade. Management did not elaborate on trading income in this quarter but in the past has said that investments in that segment have yielded results. The bank still has a good deals pipeline, but corporate America is seeking more certainty over the macroeconomic outlook and it is difficult to say when investment banking activity will bounce back, Borthwick said “For as long as we’ve got the volatility, it’s going to stay in this kind of a range,” he added. Headcount was expected to be flat from third-quarter levels. That has allowed the bank to keep down expenses, which are expected to decline by another $200 million in the fourth quarter to $15.6 billion. “We’ll see how that develops over the course of the next year,” Borthwick said. SECURITIES PORTFOLIO Three U.S. bank failures this year put focus on banks’ securities holdings, as paper losses on bond portfolios accumulate. BofA said it had unrealized losses of $131.6 billion on securities held until maturity in the third quarter, growing from nearly $106 billion in the second quarter. Analysts said it was unlikely BofA will be forced to sell the securities at a loss. Yet the low-yielding assets have also constrained BofA’s ability to put deposits to work elsewhere to make bigger profits. BofA’s provision for credit losses grew by $336 million in the third quarter in line with lending growth. BofA’s revenue, net of interest expense, increased 3% to $25.2 billion. Read Next article with gallery Worldcategory China tightens curbs on foreign travel by bankers, state workers 2:06 AM UTC Worldcategory Exclusive: China tells banks to roll over local government debts as risks mount – sources 10:43 AM UTC Financecategory Goldman profit tops estimates as dealmaking cushions hit from GreenSky, real estate 4:20 PM UTC Financecategory Bank of America’s unrealized losses on securities rose to $131.6 bln 12:39 PM UTC Reporting by Manya Saini in Bengaluru and Nupur Ananad and Saeed Azhar in New York; Editing by Lananh Nguyen, Anil D’Silva and David Gregorio Our Standards: The Thomson Reuters Trust Principles. Acquire Licensing Rights, opens new tab Manya Saini Thomson Reuters Manya Saini reports on prominent publicly listed U.S. financial firms including Wall Street’s biggest banks, card companies, asset managers and fintechs. Also covers late-stage venture capital funding, initial public offerings on U.S. exchanges alongside news and regulatory developments in the cryptocurrency industry. Her work usually appears in the finance, markets, business and future of money sections of the website. Contact: 9958867986 Nupur Anand Thomson Reuters Nupur Anand is a U.S. banking correspondent at Reuters in New York. She focuses on JPMorgan Chase, Wells Fargo and regional banks. Anand covered banking and finance in India for more than a decade, chronicling the collapse of major lenders and turmoil at digital banks and cryptocurrencies. She has a degree in English literature from Delhi University and a postgraduate diploma in journalism from the Indian Institute of Journalism & New Media in Bangalore. Anand is also an award-winning fiction writer.

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