Bank of America turned in what looked, on the surface anyway, like solid results Thursday.
As even casual market observers can attest, bank earnings are notoriously difficult to trade. The initial parse begets one narrative, which almost invariably metamorphoses into some entirely different spin, usually after investors have an hour or two to digest the numbers and listen to the call. That was on display Wednesday, following JPMorgan’s Q3 results.
Bank of America beat on both the top and bottom lines. Revenue (net of interest expense) rose 12% to $22.8 billion. NII increased 10% to $11.1 billion. Noninterest income rose 14% thanks, in part anyway, to IB.
Like JPMorgan, the bank appeared to benefit handsomely from M&A. Total investment banking fees jumped 23% to $2.2 billion. That was almost a record, and advisory fees of $654 million hit an all-time high, rising 65% in the process (figure below).
Trading results were solid. FICC revenue of $2.03 billion beat consensus, which was looking for $1.86 billion. Equities revenue of $1.61 billion was up 33%, comfortably ahead of estimates.
For the third straight quarter, the provision for credit losses was a benefit, this time to the tune of $624 million (figure below).
That reflects a reserve release of $1.1 billion. Loss rates are near half-century lows, apparently.
The $861 million sequential rise in NII (figure below) was attributed to deposit growth and “related investment of liquidity, higher PPP NII due to loan forgiveness, lower premium amortization expense, higher loan balances, and one additional accrual day.”
You can make of that what you will, but the market will take it. Analysts were looking for $10.65 billion. “Net interest income improved, despite a challenging rate environment,” CFO Paul Donofrio said.
Given consternation engendered by JPMorgan’s results, it was notable that BofA’s average loans and leases grew 6% (on a QoQ annualized basis) to $921 billion (figure below).
There are any number of ways to break that down, but I’ll spare you (and me) the trouble. Average loans and leases in the bank’s business segments rose 1.6% compared to the second quarter.
In Consumer, deposit balances exceeded $1 trillion, rising 16%. Overall, average deposits increased 15% YoY. Wealth and investment management revenue of $5.31 billion was a beat.
Donofrio noted that the bank was “able to increase the quarterly dividend by 17% and buy back nearly $10 billion in common stock.” That, he said, is “because of the way we run our business.” (I’d have come up with a more nuanced way to put it, but who am I?)
Brian Moynihan’s perfunctory remarks were characteristically nebulous, although he did manage to provide a decent summary this quarter. “Our businesses regained the organic customer growth momentum we saw before the pandemic,” he remarked. “Deposit growth was strong and loan balances increased for the second consecutive quarter, leading to an improvement in net interest income even as interest rates remained low.”
