Bank of America's Wide Reach Pays Off

By WSJ City 

Flyover banking is the best thing going for big lenders right now, Telis Demos writes for Heard on the Street.

Bank of America topped its rivals with reported total loan growth of 4.6% from a year earlier at the end of the third quarter. Surprisingly, despite the many warnings coming from banks about corporations' caution and concern, the big boost came from commercial lending, which grew 7% from a year before.

KEY POINTS

   -- What explains some of the outperformance may be Bank of America's 
      relatively bigger focus on the US. 
 
   -- ...and within the US its investment in banking smaller and midsize 
      companies. 
 
   -- Many big lenders have talked about efforts to spread bankers across the 
      country. 
 
   -- But Bank of America appears to be the biggest beneficiary so far, at 
      least in terms of loan growth. 
 
   -- Its US small-business lending alone grew 7% to $15.2bn. 
 
   -- It also helps to not be as big in what are the more challenging parts of 
      business lending at the moment. 

"Growth in this portfolio is a sign commercial clients are investing capital in the US economy at a faster pace than overall economic growth, " said Chief Executive Brian Moynihan.

Analysis

Bank of America's return on equity over the first three quarters was an unexciting but satisfactory 10.5%, compared with 15% for JP Morgan. Nonetheless, this is reflected in its valuation at 1.15 times book, versus 1.63 times for JP Morgan. That -- along with Warren Buffett's interest in increasing his stake in Bank of America beyond 10% -- should reinforce investor confidence in one of the US's most solid banking franchises.

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(END) Dow Jones Newswires

October 17, 2019 08:12 ET (12:12 GMT)

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