Bank of America (BAC) posts US$6.2 Bn net income for Q2 FY-22

Highlights:

Bank of America Corp (NYSE: BAC) reports a 34% drop in the 2^nd quarter profit.

The drop in BAC profit is caused by a slump in dealmaking due to market turmoil.

BAC’s net interest expense grew 6% to US$22.7 billion in the reported quarter.

The second-largest US bank by assets, Bank of America Corp (NYSE: BAC), reported a second-quarter net income of US$6.2 billion or US$0.73 per diluted share on Monday.

It was US$9.2 billion in the second quarter of the previous year.

The nearly 34% drop in the second-quarter profit is due to a slump in investment banking revenue as dealmaking activity was at a fraction of the previous year's deals.

Last year saw dealmaking activities touch record levels. Wall Street investment bankers did brisk business last year with overflowing deals. However, due to market volatility, geopolitical crisis, and risk-averse sentiment in the market, there was a slump in the first half of 2022.

BAC’s pretax income plunged 14% to US$6.9 billion compared to US$8.0 billion in the year-ago quarter.

Its total revenue, net of interest expense, came in at US$22.7 billion against US$21.5 billion in the same period in 2021.

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BAC revenue impacted by the global downturn

Bank of America’s profit applicable to common shareholders dropped to US$5.93 billion in the reported quarter. A year earlier, it was US$8.96 billion, or US$1.03 per share.

As companies pull the plugs on dealmaking, BAC’s investment banking fees fell 47% to US$1.1 billion, the report mentioned.

Revenue in the quarter, net of interest expense, rose 6% to US$22.7 billion vs US$21.5 in 2021 the same quarter.

The US Federal Reserve’s continual hiking of interest rates to quell the decades-high inflation has resulted in higher profits for banks. Although it risks a recession, banks always thrive in a high-interest rate scenario.

Bank of America's net interest income surged 22% to US$12.4 billion. It measures the difference between the interest earned on loans and the amount paid out on deposits. In the same quarter in 2021, it was US$10.2.

Bottom line:

Bank of America’s consumer banking unit reported a revenue jump of 12% to US$9.1 billion in the second quarter. BAC's combined credit and debit card spending grew 11% to US$220.5 billion compared to the first quarter of this fiscal year. YoY, it was up 10%.

Mridul Gogoi

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