BofA's Results Get Rate Boost -- WSJ

By Rachel Louise Ensign 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (October 16, 2018).

Bank of America Corp. said Monday that third-quarter profit rose 32%, as higher interest rates and last year's corporate tax cut continued to lift bank earnings.

Quarterly profit at the Charlotte, N.C., bank, the second largest in the U.S. by assets, was $7.167 billion, compared with $5.424 billion a year earlier. Per-share earnings were 66 cents. Analysts polled by Refinitiv had expected 62 cents.

Revenue was $22.78 billion, from $21.84 billion a year earlier. Analysts had expected $22.67 billion.

Earnings continue to benefit from last year's U.S. corporate tax cut as well as interest rates. Rising rates are typically good for banks because the companies turn a profit on the difference between what they pay on deposits and what they collect on loans. In September, the Federal Reserve raised its benchmark rate, the eighth time it has done so since it started raising rates in late 2015.

Profit rose in all of the bank's major business segments but was up the most in its retail-banking and wealth-management units.

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. Bank of America paid 0.50% on U.S. interest-bearing deposits in the third quarter, compared with 0.38% in the second quarter. Net interest income rose 6%.

Deposits grew by nearly 5% and loans were roughly flat from a year earlier. Loan growth has slowed down across the banking industry since the 2016 presidential election.

Quarterly expenses fell more than 2% to $13.067 billion from $13.394 billion a year earlier. The bank's income-tax expense fell more than 16%.

The investment-banking unit continued to struggle, with fees down 18% from the prior year. The unit has slipped in key businesses including U.S. mergers this year.

"We can do better," Chief Executive Brian Moynihan said of the business on a call with analysts Monday. The bank also attributed some of the slide to sitting out highly leveraged debt deals over risk concerns.

Bank of America's trading revenue fell 2.5%. Trading results have been mixed across the industry. On Friday, Citigroup Inc. said trading revenue was up 7%. JPMorgan Chase & Co.'s trading revenue slipped 2%.

Bank stocks jumped early in the year as market volatility fueled revenue on their equities-trading desks, but they have flatlined since then. In Monday trading, Bank of America shares fell 1.9%.

Tuesday, investment banks Goldman Sachs Group Inc. and Morgan Stanley are slated to report their quarterly results.

Write to Rachel Louise Ensign at [e-mail]

(END) Dow Jones Newswires

October 16, 2018 02:47 ET (06:47 GMT)

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