Bank of America got another boost from rising interest rates in the third quarter.
Total average loans for the period climbed to 1.4% to $931 billion from a year earlier, but the firm’s lending business still produced the most interest income since 2011, and its net interest margin climbed to 2.42%, better than analysts estimated. That helped propel profit to a record.
The results follow similar good news from Bank of America’s biggest competitors on Friday, when JPMorgan Chase, Wells Fargo & Co. and Citigroup said their consumer lending businesses were thriving. The Federal Reserve has raised its benchmark interest rate seven times in the last two years, giving banks room to boost what they charge on loans more quickly than what they pay their depositors.
“Responsible growth, backed by a solid U.S. economy and a healthy U.S. consumer, combined to deliver the highest quarterly pretax earnings in our company’s history,” Bank of America Chief Executive Brian Moynihan said Monday in a news release announcing the results.
Net income jumped 32% to $7.2 billion, or 66 cents a share. Analysts had predicted 62 cents, according to the average of 24 estimates compiled by Bloomberg. Net interest income rose to $11.9 billion.
Shares of the company, which dropped 3.6% this year through Friday, were little changed in early trading in New York.
The firm’s investment banking unit posted an 18% revenue decline for the third quarter as the firm got more selective in taking on potentially troublesome deals. That compares with a mixed picture for rivals that reported results on Friday.
The change in risk appetite came after the firm lost roughly $300 million related to the South African furniture retailer Steinhoff International Holdings NV. The strategy shift has spurred departures, including the firm’s head of corporate and investment-banking division, Christian Meissner.
Bank of America’s trading revenue fell 2.5% as the fixed-income unit posted a bigger drop than analysts expected. JPMorgan said Friday that its equity trading revenue jumped 17%, helping to offset a 10% tumble on the fixed-income side.
More highlights:
- Provisions for credit losses were $716 million, down from $834 million a year earlier. Analysts had estimated $969 million.
- Efficiency ratio, a measure of profitability, improved to 57%.
