BofA Rallies on Beating Earnings ‘Like a Boss,’ Street Says

(Bloomberg) -- Bank of America Corp. stock held onto gains on Wednesday, even as other banks turned negative, as analysts hailed better-than-expected quarterly results. The bank also kept its 2019 net interest income, or NII, growth forecast at 1%.

Shares were 2% higher in the afternoon, paring a gain of as much as 3.3% to the highest since Aug. 1. At the same time, the KBW bank index fell as much as 0.4%.

“In a moderately growing economy, we focused on driving those things that are controllable,” BofA CEO Brian Moynihan said. His comments in BofA’s earnings statement came along with CFO Paul Donofrio, saying that BofA had “remained disciplined in managing expenses and responsible in our approach to underwriting, which led to continued low costs and strong asset quality.”

Other bank stocks that were clinging to gains after earnings beats on Wednesday included BNY Mellon Corp., which pared an increase of as much as 3%; PNC Financial Services Group, paring a rise of as much as 1.8%; and US Bancorp, which trimmed a gain of as much as 3.2%. Meanwhile, big banks that had post-earnings gains on Tuesday slipped with Wells Fargo & Co. dropping as much as 1.3% and Citigroup Inc. falling 2.2%. JPMorgan Chase & Co. was little changed.

Those Tuesday earnings had showed the “consumer is booming, with better than expected loan growth and spend and lower than expected credit losses,” Morgan Stanley analyst Betsy Graseck wrote in a note. “How long will it last? Until layoffs start rising ... which we don’t see many signs of right now.” Separately on Wednesday, U.S. retail sales unexpectedly posted the first decline in seven months.

Here’s a sample of the latest commentary on BofA:

Evercore ISI, Glenn Schorr

BofA beat on earnings “like a boss,” Schorr wrote in a note. He cited solid core loan and deposit growth, strong investment banking, better card trends, flat core expenses and “even better” credit trends.

“Issues in the quarter mainly centered on balance-sheet related dynamics,” he added. The bank may discuss on the call why asset sensitivity increased and what to expect from further rate cuts, he said.

Credit Suisse, Susan Roth Katzke

BofA’s EPS beat was due to “better revenue generation and lower-than-forecast credit costs,” along with a 3 cent benefit from a lower-than-expected tax rate, Katzke wrote.

She flagged 6% year-over-year average business unit loan growth; beats in FICC and equities trading and investment banking; and positive wealth management net flows. Credit costs were also lower than forecast, with a lower net charge off rate. “All eyes” were on net interest income, which beat with less net interest margin compression, she said.

Wolfe Research, Steven Chubak

Key highlights included net interest income, investment banking, trading, credit and costs -- “basically everything,” Chubak said.

He expected shares to outperform, with a higher net interest income “jump off” and positive expense surprise likely to trigger upward revisions to estimates.

KBW, Brian Kleinhanzl

Kleinhanzl flagged the unchanged 2019 NII guidance and said, “loan growth can continue to be strong.” Earlier, he wrote that BofA overall “posted a broad-based beat with NII, provision, expenses, share count, and loan growth coming in better than expectations.”

Here’s what Bloomberg Intelligence said:

The “trading bar” for Morgan Stanley, which is due to report on Thursday, was raised as BofA joined a “sweep of beats,” analyst Alison Williams wrote.

“Morgan Stanley’s trading is a focus with 3Q results, with declines expected for equities and fixed-income trading revenue vs. 3Q18. Its year-ago quarter generally fared better than the peer aggregate, and consensus expectations for the bank to modestly underperform barely changed overall trading across global peers this quarter. The largest U.S. competitors have broadly exceeded expectations, with a sweep of FICC beats, and aggregate equities close to in-line. BofA and Goldman bested equities estimates, while JPMorgan missed and Citi was close to in-line. Morgan Stanley is relatively more equities focused, with its overall revenue from trading share second only to Goldman Sachs.”

Read more: Oct. 15, JPMorgan Hits Record, Boosting Banks. Get Ready for BofA

To contact the reporter on this story: Felice Maranz in New York at fmaranz@bloomberg.net

To contact the editors responsible for this story: Catherine Larkin at clarkin4@bloomberg.net, Jennifer Bissell-Linsk

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