BofA Counters Trading Slump With Gains in Consumer Banking
BofA’s Consumer Business Drives Record Second-Quarter Profit
(Bloomberg) -- Bank of America Corp.’s consumer bankers extended their winning streak for another three months.
Gains in the retail division helped drive overall profit to a record for a fifth consecutive quarter as mortgage activity surged and provisions for bad loans posted a surprise drop from the first quarter. The trading division, where revenue declined 10% in the second quarter, fell victim to the same slump its bigger rival JPMorgan Chase & Co. suffered during the period.
“We see solid consumer activity across the board, with spending by Bank of America consumers up 5% this quarter over the second quarter of last year,” Chief Executive Officer Brian Moynihan said Wednesday in a statement.
Bank of America shares climbed 1.1% to $29.31 at 9:45 a.m. in New York.
The biggest U.S. banks are benefiting from a solid job market, relatively strong economic growth and Federal Reserve interest-rate increases stretching back to late 2015. Despite profit blowouts in recent quarters, some investors are becoming more cautious on financial stocks amid speculation the Fed will cut rates this month. That’s prompted shares to trail the broader market.
Bank of America became the latest firm to dial down expectations for the lending business as the Federal Reserve seems poised to cut rates. Its net interest income will probably rise 1% this year if the Fed cuts rates twice in 2019, down from the 3% jump it expected in April, Chief Financial Officer Paul Donofrio said on a call with analysts Wednesday. JPMorgan and Wells Fargo & Co. also tamped down expectations for that metric this week.
BofA’s net interest income -- revenue from customers’ loan payments minus what the company pays depositors -- rose 3% to $12.2 billion in the second quarter, less than the $12.3 billion average estimate in a Bloomberg MODL survey. The bank joined JPMorgan, Wells Fargo and Citigroup Inc. in reporting sliding net interest margins compared with the previous quarter.
In Bank of America’s trading division, revenue dropped to $3.27 billion, slightly less than the average estimate of $3.32 billion. Fixed-income revenue fell 8% to $2.13 billion, while equity-trading revenue slid 13% to $1.15 billion. Donofrio said on a call with reporters that the declines weren’t due to bad bets, as the bank had no days of trading losses in the quarter.
The lender announced last month it would return as much as $37 billion to shareholders over the next four quarters by raising its dividend by 20% and boosting stock buybacks.
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To contact the reporter on this story: Lananh Nguyen in New York at lnguyen35@bloomberg.net
To contact the editors responsible for this story: Michael J. Moore at mmoore55@bloomberg.net, Steve Dickson, Daniel Taub
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