(Bloomberg) -- Bank of America Corp.’s Wall Street operations performed better than expected as the company reaped the benefits of volatile markets while net interest income topped analysts’ estimates.
Revenue from equity and fixed income, currencies and commodities trading rose 12% to $4.93 billion in the third quarter, the company said in a statement Tuesday. Investment banking also outperformed expectations, a sign that the long-awaiting rebound in dealmaking is taking hold. That helped Bank of America top analysts’ estimates for per-share earnings.
“We’ve got a good pipeline in investment banking” and the bank’s sales and trading unit aims to report another quarter of year-over-year growth, Chief Financial Officer Alastair Borthwick said on a conference call with reporters. Customers are reassured by less-volatile interest rates, he said. “We are encouraged generally with our clients’ behavior.”
The second-largest US bank said that net interest income, a key source of revenue for the company, fell 2.9% to almost $14 billion. Analysts had expected a 3.4% drop for NII, the revenue collected from loan payments minus what depositors are paid.
Investment-banking revenue rose 15%, faring better than analysts expected amid renewed strength in dealmaking. Fees for advising on mergers and acquisitions fell 14%, less than the almost 24% decline analysts had expected. Revenue from equity and debt issuance increased 16% and 37%, respectively.
Bank of America’s results offer another look at how US consumers and businesses are faring as the Federal Reserve starts lowering borrowing costs for the first time in almost half a decade. Lenders’ balance sheets overall have remained resilient, though uncertainties remain, with geopolitical tensions and the US presidential election on the horizon.
Last week, JPMorgan Chase & Co. and Wells Fargo & Co. both reported earnings that beat analysts’ estimates, with executives pointing to a surge in investment banking and trading boosting results. Both banks said that, despite pressure to net interest income, they expect they are nearing a trough in the closely watched figure.
Bank of America expects NII on a fully taxable-equivalent basis to increase to about $14.3 billion or more in the fourth quarter, executives said on a conference call with analysts. That adjusted number was $14.1 billion in the third quarter.
Shares of Charlotte, North Carolina-based Bank of America rose 1.7% to $42.64 at 9:35 a.m. in New York and have gained 26% this year.
The bank’s loan balances rose to $1.08 trillion at the end of the third quarter, up 2.5% from a year earlier and more than analysts’ estimates of $1.07 trillion. Lending has been a key focus for investors, with high interest rates making borrowing costlier and rate cuts expected to spur more lending activity.
Bank of America’s non-interest expenses also rose 4% from a year earlier to almost $16.5 billion, driven by revenue-related expenses and investments in the franchise, including people and technology, the firm said in a presentation. Charges and costs have been another focal point for investors, with persistent inflation putting pressure on spending. Analysts had expected a 4.1% increase.
Net income totaled $6.9 billion, or 81 cents a share, down almost 12% from a year earlier but better than the nearly 16% drop analysts had expected.
(Updates with CFO’s comments in third paragraph, shares in ninth. A previous version of the story corrected a loan-balance figure in the 10th paragraph.)
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