Bank of America's Earnings Move Higher
16 July 2018 - 9:19PM
Dow Jones News
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 rachel.ensign@wsj.com
(END) Dow Jones Newswires
July 16, 2018 07:04 ET (11:04 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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