Bank of America traders reported their best third-quarter results in at least seven years while net interest income topped analysts' estimates as the lender continues to reap the benefits of Federal Reserve interest rate hikes and market swings.
The company's fixed-income and equity traders trumped expectations, with stock-trading revenue up 10% to $1.7 billion. The third quarter saw dramatic market swings, as the Fed's push to quell inflation with higher interest rates helped traders.
The second-largest U.S. bank also said that net interest income, a key source of revenue for the bank, rose 4.5% to $14.4 billion in the third quarter. Analysts had expected a 2.5% increase for NII, the revenue collected from loan payments minus what depositors are paid.
"We added clients and accounts across all lines of business," CEO Brian Moynihan said in a statement Tuesday. "We did this in a healthy but slowing economy that saw U.S. consumer spending still ahead of last year but continuing to slow."
The results offer another look at how U.S. consumers and businesses are faring as the Fed leaves borrowing costs higher for longer than economists had predicted. Last week, JPMorgan Chase Wells Fargo and Citigroup beat analysts' expectations for net interest income and raised their forecasts for the remainder of the year.
Shares of Charlotte, North Carolina-based Bank of America, which were down 19% this year through Monday, rose 1% to $27.26 at 7:25 a.m. in early New York trading.
Bank of America's noninterest expenses rose 3.5% from a year earlier to $15.8 billion. Costs have been a focal point for investors, with persistent inflation putting pressure on spending and spurring wage growth. Analysts had expected a 3.3% increase.
The company's other Wall Street unit, its investment bank, also beat analyst expectations across the board, notching $1.25 billion of total fees excluding self-led deals. Fees for advising on mergers and acquisitions rose 3.7%, and revenue from equity issuance jumped 49%, while revenue from debt issuance fell 7.5%, better than the 10% drop analysts had predicted.
On the lending side, the firm's loan balances rose to $1.049 trillion at the end of the third quarter, up 1.6% from a year earlier, less than analysts' estimates of $1.053 trillion. Lending has been a key focus for investors, with government-stimulus payments cutting into borrowing by companies and consumers during the pandemic, and rising interest rates now making loans costlier.
Bond losses in the bank's held-to-maturity portfolio widened to $131 billion in the third quarter, compared with $116 billion for same period a year ago. Such losses aren't recognized in earnings because the bank plans to hold the bonds until they are paid off.
