On October 14, Bank of America Corp (BAC.N) beat estimates for the third-quarter profit boosted by strong growth across its businesses which executives said they expected to continue into the next quarter.
The rise in earnings by 64% recorded by the bank was achieved by growth in loans and leases, higher spending on credit and debit cards, and strong equity trading and M&A activity.
Net interest income (NII) measures how profitably a bank can lend out depositors’ funds and it rose nearly 10% to $11.09 billion. Despite the Bank of America’s NII hitting a low in the third quarter last year, executives said they were optimistic it would continue to rise this year and next. The bank’s Chief Financial Officer Paul Donofrio said:
“We are expecting modest NII growth from the third quarter to the fourth quarter. (It) is going to depend on loan-to-deposit growth, and we expect both of those to continue to grow, consistent with a growing economy. One could expect, I think, robust improvement in NII in … the full year 2021 versus the full year 2022.”
Throughout the third quarter, average loans and leases, excluding those from the government-backed Paycheck Protection Program (PPP), grew by 2.3% from the preceding quarter, although that figure fell 4.3% from last year.
Yet, nearly every loan product grew by some percentage in the quarter. Further growth was fueled when the bank issued around 1 million more credit cards.
“We had loan growth in every loan product at the company. It was very broad-based. We are optimistic about future growth.”
During the mid-morning trading, BofA shares were up nearly 2.5%.
The bank said combined spending on credit and debit cards was up 21% to $201 billion in the quarter. Driven by growth in client financing activities and strong trading performance, revenue from its equities division rose by 33%.
In the quarter, the second-largest U.S. bank by assets released reserves of $1.1 billion. Last year, it had set aside tens of billions of dollars to cover possible loan defaults, which it has steadily been releasing as the economic outlook improves.
Bank of America’s revenue increased by 12% to reach $22.8 billion.
For the quarter ended September 30, net income applicable to common shareholders rose to $7.26 billion, which translates to 85 cents per share, from $4.44 billion, or 51 cents per share, recorded a year earlier.
According to the IBES estimate from Refinitiv, analysts on average had expected a profit of 71 cents per share.