Bank of America's Earnings Move Higher

By Rachel Louise Ensign 

Bank of America Corp. said Monday that second-quarter profit rose.

Quarterly profit at the Charlotte, N.C.-based bank, the second largest in the U.S. by assets, was $6.8 billion, compared with $5.1 billion a year ago. Per share, earnings were 63 cents. Analysts had expected 57 cents per share.

Second-quarter revenue was $22.6 billion, down slightly from $22.8 billion a year ago. Analysts had expected $22.3 billion.

Earnings were expected to benefit from the recent corporate tax cut as well as higher interest rates. Rising rates are typically good for banks because lenders turn a profit on the difference between what they pay on deposits and the rate they collect on loans. In the quarter, the Federal Reserve raised its benchmark rate for a seventh time since December 2015.

Banks have been able to pocket most of the benefits from the rate increases because customers aren't broadly demanding more interest on their deposits.

After a huge run-up in bank stocks after the 2016 election, investors have shown little enthusiasm for banks this year. Since the start of 2018, the KBW Nasdaq bank index down about 2%. Bank of America's shares are down 3.3%.

Investors have also been wary of a bond-market phenomenon known as a flattening yield curve. This is occurring because the spread between short- and longer-term Treasury yields has narrowed. If short-term Treasury yields rise higher than longer-term yields, a so-called inverted yield curve, a recession has almost always followed within a year or two. Any recession would pose problems for banks' businesses.

Write to Rachel Louise Ensign at [e-mail]

(END) Dow Jones Newswires

July 16, 2018 07:04 ET (11:04 GMT)

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