Bank of America on Tuesday, July 16, released information on its financial results of the activity for the second quarter of the current year.
The mentioned indicators are largely related to the increase in the cost of deposits. Against the background of the upward dynamic of the specified figure, the interest income of the financial institution decreased. At the same time, the bank’s performance results for the second quarter of the current year are not unambiguously negative and cannot be characterized as critical or indicative of the fact that the lender found itself in the space of the reality of the most difficult period in the history of its existence. Financial indicators for April- June 2024 exceeded the preliminary expectations of experts. This fact indicates that in the last quarter, the bank demonstrated a result that has a content filled with positive factors. The sources of favorable impact on the lender’s financial performance in April-June 2024 were investment banking and trading operations.
The value of shares of Bank of America, which is the second largest in the United States, showed an increase of more than 4%. The corresponding dynamic of the lender’s securities is because the financial institution forecasted net interest income for the fourth quarter of 2024, which turned out to be higher than analysts’ preliminary expectations. It is worth clarifying that the mentioned indicator is the difference between what the bank earns on loans and what pays out on deposits.
Bank of America Chief Executive Officer Brian Moynihan cited an increase in the number of new consumer checking accounts for the 22nd consecutive quarter during a conference call with analysts. He began the conversation by wishing Donald Trump a speedy recovery after the assassination attempt that took place last weekend.
The presentation prepared by the financial institution contains a new target for its interest income, which takes into account three potential lowering of the cost of borrowing by the Federal Reserve by 25 basis points in September, November, and December.
David Wagner, a portfolio manager at Aptus Capital Advisors, says that Bank of America has managed to demonstrate growth in some sectors, despite difficult conditions in terms of interest income opportunities. The expert was surprised that this financial institution expects three interest rate cuts in the United States before the end of the current year, while the market assumes that there will be only two lowering of borrowing costs.
In recent times, investment banks have increased their underwriting fees. The corresponding tendency in the decisions of financial institutions is associated with the resurged of capital markets. The mentioned state of affairs is a positive consequence of the fact that the situation in the space of the economic system of the United States in recent months has demonstrated stability. Against the background of the mentioned economic reality, companies began to raise capital by carrying out activities related to the sale of shares and the issuance of bonds.
There is also currently a process of intensification of mergers and acquisitions. Against the background of the corresponding tendency, fees for investment bank advising are growing.
The fees of investment banking services of a financial institution headed by Brian Moynihan for April-June of the current year were fixed at $1.6 billion. This indicator showed an increase of 29% compared to the result for the same period in 2023.
The financial institution’s income from underwriting in April-June 2024 increased by 32% year-on-year. At the same time, syndication fees grew by 77% over the same period compared to the result for the second quarter of 2023.
Bank of America’s sales and trading revenue for April- June 2024 was fixed at $4.7 billion. This indicator showed an increase of 7% year-on-year. It is worth noting that the lender’s revenue from the specified activities is on an upward trajectory for the ninth consecutive quarter. In this case, the factor of positive impact on the dynamic of the indicator is the tendency in the form of an increase in stock prices.
Alastair Borthwick, the bank’s Chief Financial Officer, told reporters during a conference call that the interest rate situation had settled down a little bit. At the same time, he noted that currently there is a state of affairs in the space of geopolitical relations, the main characteristic feature of which is a high level of uncertainty. Alastair Borthwick also mentioned the uncertainty surrounding the election. According to him, in such situations, clients tend to change their position. Alastair Borthwick also characterized the current state of affairs in the global sense of an appropriate formulation that takes into account the diversity of aspects of the present historical period, which is an objective reality for the space of human civilization, as favorable from the point of view of its characteristics as a factor impacting the prospects of a financial institution in the areas of trading and sales.
The bank’s profit for April-June of the current year was fixed at $6.9 billion, or 83 cents per share. This indicator is 7% lower than the result recorded for the same period last year. It is worth noting that LSEG’s preliminary estimate provided that the financial institution’s profit for April- June 2024 would be 80 cents per share.
The bank’s unit, which specializes in global wealth and investment management activities, recorded revenue of $5.6 billion in the second quarter of the current year. This indicator increased by 6% compared to the result for the same period in 2023.
The balance sheets of the financial institution’s clients showed growth in April- June 2024. In monetary terms, the corresponding indicator exceeded the $4 trillion mark after an increase in the last quarter. This figure grew by 10% year-on-year.
The costs aimed at preventing the outflow of deposits have caused a decrease in the lender’s profit from the increase in interest charged to borrowers.
It is worth noting that there is currently a trend in the United States, in which financial institutions are spending more and more on deposits. The relevant actions of banks are related to the circumstance that interest rates have reached their highest level since 2007. Against the background of this dynamic the mentioned indicator, an increase in bond yields was recorded. Alternatives such as money market funds have also become more attractive.
The total revenue of the financial institution for April-June of the current year was fixed at $25.54 billion. This indicator increased by 1% compared to the result for the same period last year. It is worth noting that the mentioned revenue does not take into account interest expense. The preliminary LSEG estimate provided that the corresponding figure for the second quarter of 2024 would be $25.22 billion.
The non-interest income of a financial institution for April-June of the current year was fixed at $11.7 billion. This indicator increased by 6% compared to the result for the same period last year.
The financial institution’s provisions for possible credit losses for the second quarter of 2024 amounted to $1.5 billion. A year earlier, the corresponding figure was fixed at $1.1 billion.
The bank’s executives predict a recovery in the lender’s performance in the second half of 2024. They expect that in the fourth quarter of the current year, the financial institution’s net interest income will be fixed at $14.5 billion. It is worth noting that the LSEG estimate provides that the mentioned figure for the specified period will amount to $14.4 billion, as the lender reprices mortgages and auto loans.
Stephen Biggar, banking analyst at Argus Research, says that the forecast for an increase in net interest income solidifies earlier comments signaling that the mentioned figure would reach a trough in the fourth quarter.
Since the beginning of the current year, Bank of America shares have risen by almost 30%. In terms of the corresponding indicator, the financial institution has outperformed its competitors such as JPMorgan Chase and Wells Fargo.
Bank of America was founded in 1923. In August 2018, the financial institution had a market capitalization of $313.5 billion. After reaching this figure, the bank became the 13th largest company in the world. The financial institution was ranked No. 25 on the 2020 Fortune 500 rankings of the largest US corporations by total revenue. Moreover, Bank of America was also ranked No. 6 on the 2023 Global 2000 rankings done by Forbes. In addition, the financial institution was named the World’s Best Bank by the Euromoney Institutional Investor in its 2018 Awards for Excellence.
The lender serves about 69 million consumers and small business customers in the United States. Bank of America has approximately 3,800 retail financial centers, around 15,000 ATMs (automated teller machines), and award-winning digital banking with about 58 million verified digital users.
The lender offers industry-leading support to approximately 4 million small business households through a suite of innovative, easy-to-use online products and services.
As we have reported earlier, Morgan Stanley Q2 Earnings Exceed Expectations.
