Bank of America quarterly profit increases 58% on higher interest income

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Bank of America Corp.

BAC 4.47%

said on Thursday third-quarter profit rose 58%, suggesting banks’ lending activities are starting to improve after a pandemic crisis.

The bank freed up $ 1.1 billion from reserves it had set aside for pandemic defaults, helping to boost its profits. Turnover increased by 12% compared to the previous year.

Bank profits soared in the last quarter in large part because the US economy rebounded so quickly from the pandemic recession. Last year, banks set aside billions of dollars to prepare for a wave of defaults, but now they are releasing the money they had set aside. This helped drive double-digit earnings at JPMorgan Chase & Co., Citigroup Inc.

and Wells Fargo & Co. Equity trading and a trading boom also drove profits up.

Much of the country’s economic activity passes through Bank of America and its peers, providing a real-time view of how consumers and businesses are recovering from the pandemic. Despite the improving economy, banks have struggled to increase their loan portfolios this year. Total outstanding loans were down from a year ago at Bank of America and Wells Fargo, and stable at Citigroup.

Still, bank executives have said they are seeing signs that consumers and businesses have a growing appetite for debt. Bank of America said its consumer and small business customers were spending well before pre-pandemic levels.

The bank’s outstanding loans and leases stood at $ 927.74 billion at the end of the third quarter, up slightly from the second quarter but down 3% from the previous year. Without the loan runoff from the government’s paycheck protection program, the bank’s loan portfolio would have increased nearly 2% from the second quarter.

Commercial loans in the United States and abroad have increased over the past year. Plus, more people borrowed from their equity portfolios. Securities lending to wealth management clients has jumped by around a quarter over the past year.

The bank benefited from a rebound in net interest income, which includes money it makes on loans and holdings of debt securities such as mortgage-backed securities. Net interest income increased 10% from the previous year to $ 11.1 billion.

“We expect greater loan growth for all of our products,” Paul Donofrio, the bank’s outgoing chief financial officer, said on a call with reporters on Thursday.

Bank of America’s non-interest income, which includes fees, increased 14% from a year ago to $ 11.67 billion.

A boom in mergers and acquisitions has helped drive up investment banking costs across the industry. Consulting fees have more than tripled at Morgan Stanley and Citigroup, and more than doubled at JPMorgan. They increased 65% at Bank of America. Wall Street giant Goldman Sachs Group Inc.

reports its results on Friday.

Bank of America negotiators have often lagged behind their peers, but Donofrio said the deal pipeline remains strong in the fourth quarter.

Income from equity transactions increased almost everywhere in banks, but fixed income transactions slowed. JPMorgan and Citigroup both reported a 5% drop in their overall trading revenues; Morgan Stanley announced a 6% increase.

At Bank of America, total adjusted trading revenue was $ 3.63 billion, up 9% from the previous year.

The wealth management business posted a profit of $ 1.2 billion, its best quarter since Bank of America bought Merrill Lynch during the financial crisis.

Overall, America’s second-largest bank earned $ 7.69 billion, up from $ 4.88 billion in the same period a year earlier. Earnings per share of 85 cents exceeded the 71 cents expected by analysts polled by FactSet.

Revenue totaled $ 22.77 billion, up 12% from $ 20.34 billion a year ago. This exceeded analysts’ expectations for revenue of $ 21.68 billion.

Analysts and investors are also watching spending closely, which has increased in recent quarters. Non-interest spending was roughly stable from the previous year at $ 14.44 billion.

Bank of America’s stock price is up 49% so far this year, including a 4.5% rise on Thursday.

Bank income

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Write to Ben Eisen at [email protected]

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