Bank of America’s strong third-quarter results have positive implications for the forecast both at the Charlotte, North Carolina, megabank and throughout the industry.
BofA expanded its interest income and fee revenue — signaling that demand for credit is rebounding alongside a strengthened economy and eased pandemic worries — while keeping its expenses in check.
The nation’s second-largest bank by assets expects continued momentum late this year and into next. Executives cited projections for robust economic growth through 2022, driven by consumer spending and business investments.
“The prepandemic organic growth machine has kicked back in. You see that this quarter, and it is evident across all our lines of business,” Chairman and CEO Brian Moynihan said Thursday during a call with analysts after the bank reported its third-quarter results.
Bank of America’s operations span the country and nearly every segment of consumer and commercial banking, making it a bellwether for the pandemic recovery.
BofA’s results “should bode well for the bank industry overall,” said Raymond James analyst Daniel Tamayo.
The company’s third-quarter revenue climbed 12% from a year earlier to $22.8 billion, with jumps in both fee income and revenues from lending.
Noninterest income increased 14% to $11.7 billion, reflecting growth across every business segment. Net interest income, meanwhile, advanced 10% from a year earlier to $11.1 billion.
Third-quarter consumer spending among BofA’s customers — based on payments data — rose more than 20% from both a year earlier and the third quarter of 2019.
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Loans and leases totaled $928 billion at the close of the third quarter. That number was down from $955 billion a year earlier — a continuation of sluggishness that has spanned the pandemic — but up 10% from the second quarter. Moynihan had previously said he
Even though interest rates are holding near historic lows, the increase in loan volume from the previous quarter helped fueled the increase in net interest income. Moynihan said that he expects more borrowing from both consumers and businesses to propel continued increases.
Bank of America’s research team estimates that U.S. gross domestic product will expand by 5.5% this year and 5.2% in 2022, according to Moynihan.
Consumer digital sales at the $3 trillion-asset bank swelled 27% from a year earlier. “This bodes well for future sales levels and for future efficiency,” Moynihan said.
BofA’s Paycheck Protection Program loans have declined from a peak of $25 billion last year to about $8 billion at the end of the third quarter, as many borrowers have used the Small Business Administration’s loan forgiveness portal.
Excluding PPP loans, consumer and commercial loans increased 9% on an annualized basis from the prior quarter, with commercial loans up 11% and consumer loans ahead 6%, according to the bank.
Third-quarter noninterest expenses, meanwhile, were flat from a year earlier at $14.4 billion and down 4% from the prior quarter, thanks in large part to lower pandemic-related costs.
Net income soared 58% to
Credit quality was strong — BofA’s net charge-offs declined 22% from the second quarter and 52% from a year earlier to $463 million — and Moynihan said that he expects it to remain so.
