Banks

Bank of America shares rise after lender posts better-than-expected profit on retail operations

Key Points
  • The bank says net income rose 4% to $7.5 billion, or an adjusted 75 cents a share, excluding an impairment charge. When including the $2.1 billion charge, net income fell to 56 cents a share, exceeding the 51 cent estimate of analysts surveyed by Refinitiv.
  • Three of the bank's four main divisions report gains in revenue, led by its global banking business, which posts an 8% increase to $5.2 billion on higher investment banking fees.
  • Shares of the bank rose 3.3%.
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Bank of America earnings: $0.56 a share, vs $0.51 EPS expected

Bank of America beat analysts' estimates for third-quarter profit and revenue as its consumer and advisory businesses offset a slump in trading.

The bank said Wednesday that net income excluding an impairment charge rose 4% to $7.5 billion, or an adjusted 75 cents a share. When including the $2.1 billion charge tied to the end of a partnership with First Data, net income fell to 56 cents a share, exceeding the 51 cent estimate of analysts surveyed by Refinitiv.

Shares of the bank rose 3.3%.

Three of the bank's four main divisions reported gains in revenue, led by its global banking business, which posted an 8% increase to $5.2 billion on higher investment banking fees. Citing a boost from hiring more bankers in a push for middle-market deals, the bank posted a 27% increase in advisory fees to $1.5 billion, exceeding the $1.27 billion estimate. The performance was the biggest gain in investment banking revenue reported so far of any major Wall Street firm.

Consumer banking revenue rose 3% to $9.7 billion on increased interest income as the bank grew loans by 7% and deposits by 3%. Wealth management revenue climbed 2% to $4.9 billion on higher interest and asset management fees.

In the Wall Street trading division, revenue excluding accounting charges fell 2% to $3.88 billion. But the trading desks essentially matched expectations, producing $2.1 billion in fixed income revenue and $1.1 billion in equities trading revenue. Total company revenue was almost unchanged from a year earlier at $23 billion, edging out the $22.79 billion estimate.

"In a moderately growing economy, we focused on driving those things that are controllable," CEO Brian Moynihan said in the earnings release. "We made continued strong investments in our capabilities to serve customers, more relationship management teammates, more and refurbished branches and offices, and more digital capabilities, all while core expenses are flat."

Bank of America, the second-biggest U.S. lender after J.P. Morgan Chase, is the "most asset sensitive" among the big banks, meaning that changes in interest rates impact it the most, according to Morgan Stanley analyst Betsy Graseck.

On a conference call Wednesday, management reiterated guidance that growth in net interest income in 2019 would be about 1% after the Fed cut rates twice in the quarter. CFO Paul Donofrio declined to give analysts an estimate on NII for 2020, saying it was dependent on what the Fed does.

Under Moynihan, Bank of America has steadily trimmed expenses while holding the line on or increasing revenue. (The bank has said that its expenses would total $53 billion for 2019.) That has made it a favorite holding of Warren Buffett's Berkshire Hathaway, which has asked the Fed for permission to take his stake beyond the 10% level, according to Bloomberg.

The bank's shares have climbed 21% this year before Wednesday's earnings report, exceeding the 18% return of the KBW Bank Index.

On Tuesday, J.P. Morgan posted profit that beat analysts' expectations on the strength of consumer banking operations and better-than-anticipated bond-trading results. Goldman Sachs missed on profit as investment banking revenue fell and the firm took writedowns on Uber and WeWork stakes.

Here's what Wall Street expected:
Adjusted earnings: 51 cents a share, down 23% from a year earlier, according to Refinitiv.
Revenue: $22.79 billion, down 0.6% from a year earlier.
Net Interest Margin: 2.39%, according to FactSet
Trading Revenue: Fixed income $2.04 billion, Equities $1.09 billion

Correction: This article has been updated to show Bank of America earned 56 cents a share for the quarter.

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Banks

Citigroup earnings beat on better-than-expected trading results

Key Points
  • The bank's revenues from its fixed-income, currency and commodities trading division got a boost from higher rates during the quarter as well as "improved activity" with corporate and investor clients, Citigroup says.
  • CEO Michael Corbat also touts the strength of the U.S. consumer, noting branded-cards revenue expanded by 11% in North America during the third quarter.
  • However, the bank's lending business posted weaker-than-forecast results, with net interest income coming in at $11.64 billion. Analysts polled by StreetAccount expected net interest income of $12.15 billion.