Bank of America's Earnings, Revenue Grow More Than Expected -- 2nd Update
July 18 2017 - 6:42AM
Dow Jones News
By Rachel Louise Ensign
Bank of America Corp. said its second-quarter profit climbed 10%
as rising short-term interest rates offset a trading slump.
Quarterly profit at the Charlotte, N.C.-based bank was $5.27
billion, compared with $4.78 billion a year ago. Per share,
earnings were 46 cents. Analysts had expected 43 cents a share.
Second-quarter revenue was $23.07 billion, up from $21.51
billion a year ago. Analysts had expected $21.78 billion.
Bank of America shares have rallied of late, climbing 41% since
the November election. The initial share-price gains after Donald
Trump's surprise victory have been sustained as the lighter
regulatory touch investors hoped for has started to materialize.
Short-term interest rates have also kept moving higher with the
jobs picture strengthening, aiding the bank's results.
In late June, Bank of America got Federal Reserve approval for a
large increase in its dividend and stock buybacks. Since then, the
bank's stock has regularly traded above its book value, a level it
never reached between the financial crisis and the start of
2017.
Bank of America's large base of U.S. deposits and rate-sensitive
mortgage securities makes it particularly poised to benefit from
the recent uptick in interest rates, which recently started rising
after years of record lows. The bank's net interest income rose,
helped by the fact that it still hasn't started to pay
significantly higher rates to depositors.
The rate the bank paid on U.S. interest-bearing deposits was
0.11%, compared with 0.09% in the prior quarter.
But the lender, the second largest U.S. bank by assets, faced
challenges in the second quarter. The bank warned trading revenue
would be under pressure. Also, long-term interest-rates reversed
and started moving lower during part of the quarter, which
contributed to the lender trimming its expectations for growth in
net interest income. Similar factors weighed on earnings reports
from J.P. Morgan Chase & Co. and other big lenders that
reported their earnings on Friday.
Trading revenue at Bank of America, excluding an accounting
adjustment, fell 9% to $3.37 billion from $3.7 billion in the
second quarter of last year.
Quarterly expenses rose 1.7% to $13.73 billion, from $13.49
billion a year ago. Chief Executive Brian Moynihan has made cost
cutting a key tenet of his business strategy, and last year he
promised to cut another $5 billion in annual expenses by 2018.
Shares moved 1.1% lower in premarket trading.
Write to Rachel Louise Ensign at rachel.ensign@wsj.com
(END) Dow Jones Newswires
July 18, 2017 07:27 ET (11:27 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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