Bank of America tops Q3 estimates with solid results

Bank of America (BAC) topped market expectations on revenues and earnings for the third quarter of 2018. The financial services firm reported total revenues, net of interest expense, of $22.8 billion, up 4% compared to the same period last year.

Net interest income rose 6% to $11.9 billion, helped by higher interest rates as well as loan and deposit growth while non-interest income grew 2% to $10.9 billion. Net interest yield was up 6 basis points to 2.42%. Average deposits grew 4% to $1.3 trillion while average loans and leases grew 1% to $931 billion.

Net income improved 32% to $7.2 billion, driven by strong operating leverage, asset quality and tax reform benefits, while diluted EPS grew 43% to $0.66 from the prior-year period.

Non-interest expense decreased 2% to $13.1 billion while efficiency ratio improved to 57%. Provision for credit losses dropped to $716 million. Net charge-offs grew to $932 million, mainly due to credit card portfolio seasoning and loan growth while non-performing assets dropped to $5.4 billion, driven by improvements in the consumer and commercial portfolios.

The bank saw earnings growth across all its segments with the highest in Consumer Banking. Revenues increased 7% in Consumer Banking and 4% in Global Wealth and Investment Management (GWIM). GWIM benefited from higher asset management fees and net interest income.

Revenues dropped 5% in Global Banking and 1% in Global Markets with the decline in Global Markets revenues reflecting lower sales and trading revenue and investment banking fees. Excluding net DVA, Global Markets revenues increased 1%.

During the quarter, average loans and leases increased across all segments barring Global Markets which saw a slight drop year-over-year. Average deposits improved across all segments with the exception of GWIM, which recorded a slight decline from the prior-year period.

On Friday, Bank of America’s peers JPMorgan and Citigroup reported third quarter results. JPMorgan beat revenue and earnings estimates while Citigroup, despite topping profit estimates, missed the mark on revenues.

Bank of America’s shares are up 0.53% in premarket trade. The stock has been down over 3% so far this year.

Bank of America to benefit from lower expenses, trading recovery in Q3