Bank of America Corp. third quarter earnings rose 58%, suggesting that banks’ lending activities are starting to improve after a pandemic crisis.
America’s second-largest bank earned $ 7.69 billion, up from $ 4.88 billion a year earlier. Earnings per share of 85 cents exceeded the 71 cents expected by analysts polled by FactSet.
Much of the country’s economic activity passes through Bank of America and its peers, providing a real-time view of how consumers and businesses are recovering from the pandemic. The bank said its consumer and small business customers were spending well before pre-pandemic levels.
The bank benefited from a rebound in net interest income, which includes money it makes on loans and holdings of debt securities such as mortgage-backed securities. Net interest income increased 10% from the previous year to $ 11.1 billion.
Despite an improving economy, banks have struggled to increase their loan portfolios this year. JPMorgan Chase & Co. said on Wednesday its loan portfolio was virtually unchanged from the second quarter, but executives said they were seeing signs that consumers and businesses have a growing appetite for debt.
At Bank of America, outstanding loans and rentals stood at $ 927.74 billion at the end of the third quarter, up slightly from the second quarter but down 3% from a year ago . Without the loan runoff from the government’s paycheck protection program, the bank’s loan portfolio would have increased nearly 2% from the second quarter.
Commercial loans in the United States and abroad have increased over the past year. Plus, more people borrowed from their equity portfolios. Securities lending to wealth management clients has jumped by around a quarter over the past year.
“We expect greater loan growth for all of our products,” Paul Donofrio, the bank’s outgoing CFO, said on a call with reporters Thursday.
Non-interest income, which includes fees, increased 14% from a year ago to $ 11.67 billion.
A boom in mergers and acquisitions helped push up investment banking fees, which rose 23% from a year earlier to $ 2.17 billion. Bank of America’s investment bank has often fallen behind its peers, but Donofrio said the deal pipeline remains strong in the fourth quarter.
Adjusted trading revenue was $ 3.63 billion, up 9% from the previous year.
Profit was also boosted by a release of cash she had set aside to cover loan losses. So far, pandemic defaults have not materialized, prompting the bank to release $ 1.1 billion from its reserves. Net expenses were halved from a year ago to $ 463 million.
Analysts and investors are also watching spending closely, which has increased in recent quarters. Non-interest spending was roughly stable from the previous year at $ 14.44 billion.
The Bank of America stock price, which has risen 42% so far this year, traded ahead of the stock market on Thursday by around 2.5%.
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