Bank of America posted profit that exceeded analysts’ expectations on strength in its sprawling retail bank.
The lender said Wednesday that it generated $7.3 billion in second-quarter profit, an 8% increase from a year earlier, or 74 cents a share, compared with the 71 cent estimate of analysts surveyed by Refinitiv. It posted revenue of $23.2 billion, a 2.1% increase from a year earlier, matching analysts’ estimate.
Under CEO Brian Moynihan, the bank delivered record first-half profit, fueled by the company’s retail lending operations and Moynihan’s expense initiatives. It was the 18th straight quarter Moynihan and his executives have managed to improve the firm’s operating leverage, meaning it has grown revenue while cutting or holding the line on costs.
Still, the stock took a hit in April when Chief Financial Officer Paul Donofrio warned investors that growth of net interest income this year would be half the 6% the bank generated in 2018. Now, after the Federal Reserve recently signaled that it’s likely to cut its benchmark short-term interest rate later this month, the question is, does that further slow the growth in this main profit engine for banks?
There were some early signs of this. Bank of America’s net interest margin, a key metric of profitability, declined 7 basis points from the first quarter to 2.44%, which is below the 2.47% estimate analysts had for the second quarter.
The bank’s shares dipped 0.4% at 7:09 am in premarket trading. So far this year, Bank of America shares have climbed 18%, but are lower than when the company made its revenue warning in April.
Profit in the firm’s biggest division, its consumer bank, rose 13% to $3.29 billion as revenue climbed 5% to $9.72 billion as the firm added deposits and loans, which led to higher net interest income. That was the strongest showing among the bank’s four main businesses, followed by its wealth management division, where profit rose 11% to $1.07 billion.
Meanwhile, profit fell 9% to $1.93 billion in its global banking division
Earlier this week, Citigroup, J.P. Morgan Chase, Wells Fargo, and Goldman Sachs all beat analysts’ profit expectations as the firms benefited from one-time gains including a gain on the IPO of electronic market maker Tradeweb.
Here’s what Wall Street expected:
- Earnings: 71 cents a share, a 12.3% increase from a year earlier, according to Refinitiv.
- Revenue: $23.2 billion, a 2.1% increase from a year earlier.
- Net interest margin: 2.47% according to FactSet
- Trading Revenue: Fixed income $2.1 billion, Equities $1.22 billion
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