Consumers Lift Bank of America Profit -- WSJ
18 July 2019 - 5:02PM
Dow Jones News
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 (July 18, 2019).
U.S. consumers propelled Bank of America Corp.'s profit in the
latest quarter, though the bank warned it could take a hit from any
Federal Reserve rate cuts.
The Charlotte, N.C.-based bank, the second-largest in the U.S.
by assets, posted a profit of $7.35 billion, an 8% increase from
the $6.78 billion a year earlier. Per share, earnings were 74
cents. Analysts polled by FactSet had expected 71 cents per
share.
Second-quarter revenue was $23.08 billion, up from $22.55
billion a year ago.
Other lenders including JPMorgan Chase & Co. and Citigroup
Inc. posted earnings this week that also showed strong consumer
spending and borrowing but some weakness in corporate activity.
Bank of America's earnings followed that same pattern: Profit was
up in consumer banking and wealth management, but down in its
global banking and markets units that cater to corporate
clients.
PNC Financial Services Group Inc. and U.S. Bancorp, regional
banks with big consumer businesses, also reported higher profits on
Wednesday. Goldman Sachs Group Inc., which has a smaller consumer
presence, is the only major bank so far to post a second-quarter
drop in profit.
Bank of America CEO Brian Moynihan said on a call with analysts
that the bank saw solid consumer activity in the quarter, but also
noticed business confidence slip a bit. Certain firms were affected
by the continuing trade battles, he said.
Higher interest rates have boosted banks' performance since the
Fed started raising them in late 2015. That is because banks were
able to charge borrowers more interest without having to
significantly increase payouts to depositors.
Now that the Fed is signaling it could lower rates, that in some
ways is good for consumers. Card spending and mortgage originations
were up at Bank of America, as well as at other big banks.
But the prospect of lower rates also clouds the outlook for
banks' businesses. JPMorgan on Tuesday lowered its expectations for
its lending operations. Bank of America executives said that lower
long-term rates and any Fed rate cuts would cut into net interest
income growth this year.
Bank of America's net interest margin, a key metric of lending
profitability, fell to 2.44% from 2.51% in the prior quarter.
Bank of America managed to keep a lid on interest-rate increases
to customers in the second quarter. The bank paid 0.77% on U.S.
interest-bearing deposits in the period, compared with 0.73% in the
first quarter.
Net interest income, or the difference between what a bank makes
from loans or investments and the interest paid to depositors, rose
3% from a year earlier but fell about 1.5% from the prior
quarter.
Loans at Bank of America were up 3% from a year earlier, while
deposits rose 5% over that period. Expenses were roughly flat.
Though stocks are surging, banks have warned that clients should
remain cautious about placing big bets.
Trading revenue fell about 10% at Bank of America, and merger
advisory fees were also lower, following declines across the
industry.
Shares rose more than 1% in morning trading.
Write to Rachel Louise Ensign at rachel.ensign@wsj.com
(END) Dow Jones Newswires
July 18, 2019 02:47 ET (06:47 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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