Bank of America shares drop as the firm sets aside another $4 billion for coronavirus-related loan losses

Bank of America on Thursday posted second-quarter earnings that were bolstered by stronger-than-expected bond trading and investment banking revenue.

The bank said it generated earnings of $3.5 billion, or 37 cents a share, exceeding the 27 cents a share expected by analysts surveyed by Refinitiv. However, revenue of $22.5 billion barely edged out analysts’ estimate of $22 billion. Shares of the Charlotte, North Carolina-based bank dipped 3% in premarket trading. 

Bank of America’s trading division helped offset the drag caused by the coronavirus pandemic, although the firm’s trading results were less eye-popping than rivals JPMorgan Chase and Goldman Sachs. The lender increased reserves for credit losses by $4 billion, and lower interest rates sapped interest income by 11%.

Bond trading revenue climbed 50% to $3.2 billion, and equities trading revenue climbed 7% to $1.2 billion. Combined, the trading division exceeded estimates by $500 million. Investment banking fees rose 57% to a record $2.2 billion in the quarter, exceeding the $1.67 billion estimate.

In May, Chairman and CEO Brian Moynihan said he expected trading revenue to rise by “high single digits,” a figure that would pale next to how rivals performed. At JPMorgan, trading revenue surged 79% to a record $9.7 billion, and Goldman produced a 93% increase in trading revenue to $7.2 billion.

Bank of America is considered by analysts to be the most sensitive of large banks when it comes to changes in interest rates, so they will be keen to hear how the lender is navigating the low-interest rate environment.

On Tuesday, JPMorgan and Citigroup posted profit that beat analysts’ expectations on strong trading and investment banking results, factors that helped Goldman Sachs notch its biggest earnings beat in nearly a decade on Wednesday. Wells Fargo posted its first loss since the financial crisis on loan loss reserves.

Bank of America shares have fallen 30% this year, compared with the 34% decline of the KBW Bank Index.

Here’s what Wall Street expected:

Earnings: 27 cents a share, a 64% drop from a year earlier, according to Refinitiv.

Revenue: $22 billion, a 5.3% drop from a year earlier.

Net interest margin: 2.04%, according to FactSet.

Trading revenue: Fixed income $2.63 billion; equities $1.27 billion.

This story is developing. Please check back for updates.