Bank of America Sees Mixed Q2 Results Amid High Interest Rates

Bank of America's second-quarter profit dipped due to decreased interest income and increased provisions for potential credit losses. Despite this, their shares rose after a positive net interest income forecast. The bank also reported substantial gains in investment banking fees and wealth management revenues.

Bank of America's second-quarter profit fell as income from interest on loans shrank and provisions for potential credit losses jumped. Despite this, a better-than-expected forecast for net interest income sent the bank's shares higher in premarket trade.

Banks are paying more on deposits as interest rates are at their highest since 2007. This has boosted returns on bonds, making alternatives such as money market funds more attractive. The cost of preventing a deposit outflow has eroded banks' gains from the rising interest they are charging borrowers.

Net interest income (NII) - the difference between what banks earn on loans and pay out on deposits - fell 3% to $13.7 billion in the second quarter. Provisions for credit losses rose to $1.5 billion from $1.1 billion a year earlier. CEO Brian Moynihan highlighted the strength and earnings power of the consumer banking business, as well as growth and profitability in global markets, banking, and wealth management businesses.

The second biggest U.S. lender earned $6.9 billion, or 83 cents per share, in the quarter ended June 30, compared with $7.4 billion, or 88 cents per share, a year earlier. The bank expects $14.5 billion in fourth-quarter NII, higher than LSEG estimates of $14.4 billion, partly due to headwinds from the repricing of mortgage and auto loans.

Shares of the bank climbed 2.2% to $42.80, having gained 24.4% so far this year. This performance has outpaced rivals JPMorgan Chase and Wells Fargo.

Investment banks have increased underwriting fees as capital markets resurged. A resilient U.S. economy has led companies to raise capital by selling stocks and issuing bonds. Mergers and acquisitions are also gaining momentum, boosting advisory fees for investment banks. BofA's investment banking fees jumped 29% to $1.6 billion, aligning with results at other major banks.

BofA's investment banking unit faced tougher year-over-year comparisons versus its rivals. In Q2 2023, BofA's investment banking fees grew 7%, while JPMorgan and Citigroup reported a drop. BofA's underwriting income jumped 32% in Q2 2024, and fees from syndication surged 77%.

Its wealth and investment management unit also fetched 6% higher revenue and saw 10% growth in client balances to a record of more than $4 trillion.

(With inputs from agencies.)