Bank of America's profits, consumer revenue fall

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Bank of America’s traders didn’t seize on the markets boon that lifted rival banks in the third quarter.

Revenue from trading rose 3.6% to $3.34 billion, falling short of the $3.5 billion that analysts had forecast. While JPMorgan Chase and Citigroup each posted jumps of at least 17% at their trading desks, Bank of America’s small increase wasn’t enough to boost overall revenue as the bank’s consumer unit saw a 17% slide from a year earlier.

Wall Street trading desks have benefited from active markets during the pandemic, and those results have propped up lending units that are grappling with broader economic hardship in the U.S. after the coronavirus pandemic shuttered businesses and put millions of Americans out of work.

Chief Executive Brian Moynihan has called for another round of federal stimulus to keep businesses afloat and promote economic recovery. With its 4,300 branches across the country, Bank of America is often seen as a bellwether for the U.S. consumer. And while it increased loan-loss reserves, the company’s leaders have expressed more optimism than their peers on the economy, citing a rebound in consumer spending and robust credit quality.

The bank set aside $1.39 billion more for soured loans, less than analysts had estimated. That follows JPMorgan and Citigroup, which on Tuesday earmarked a combined $2.87 billion for loan losses in the third quarter, less than half what analysts expected.

Net interest income at Bank of America, or revenue from customer loan payments minus what the company pays depositors, fell to $10.2 billion on a fully taxable-equivalent basis, compared with analysts’ $10.3 billion median forecast.

Earnings also were affected by some one-time items, including a $700 million gain from a deferred-tax asset in the U.K., which was countered by litigation costs.

Bank of America shares fell 2% at 7:07 a.m. in early New York trading. The stock was down 29% this year through Tuesday.

Also in the third-quarter results:

  • The bank’s efficiency ratio, a measure of profitability, worsened to 71% from 60% in the second quarter.
  • Net income fell to $4.88 billion from $5.8 billion a year earlier, surpassing the $4.3 billion average estimate of 12 analysts. Per-share earnings of 51 cents beat analysts’ 50-cent forecast.
Bloomberg News
Earnings Consumer banking Revenue and expenses Loan-loss provisions Bank of America
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