Bank of America’s (BAC) Q3 profits beat forecast, deposits up 15%  

Highlights

• BAC’s third-quarter revenue increased by 12% to US$22.8 billion.
  
  
• The net income increased to US$7.26 billion, or 85 cents per share.
  
  
• The average deposits were up US$247 billion, or 15%, to US$1.9 trillion.

Bank of America Corporation (NYSE: BAC) on Thursday reported strong third-quarter performance, boosted by robust merger and acquisition activities and growth in loan and lease segments.

The company said that these activities, along with higher spending on credit and debit cards and strong equity trading, lifted its performance and helped register a 64% increase in earnings.

The bank’s net interest income, a key metric that shows lending income, rose nearly 10% to US$11.09 billion. Loans, excluding government-backed credits and stimulus paychecks, and lease segments saw a 2.3% growth in the third quarter from Q2, but down 4.3% on a YoY basis.

BAC’s chief financial officer Paul Donofrio said that the company saw significant growth in every loan segment besides increased card transactions.

CEO Brian Moynihan said the economy regained its organic customer growth momentum comparable to the pre-pandemic levels during the quarter. In addition, strong deposit growth and loan balances helped improve its net interest income, although the rates were low, Moynihan added.

Moynihan said the bank returned nearly US$12 billion in capital to shareholders due to record investment banking activities boosted by commercial loan balances.

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BAC’s third-quarter performance

BAC’s third-quarter revenue increased by 12% to US$22.8 billion. The net income increased to US$7.26 billion, or 85 cents per share, from US$4.44 billion, or 51 cents per share, a year ago.

Analysts had forecast a profit of 71 cents per share, the Refinitiv data showed. Also, BAC’s net interest income increased by 10% to US$11.1 billion, driven by strong deposit growth. The average deposits were up US$247 billion, or 15%, to US$1.9 trillion.

The company said that its credit losses improved by US$2.0 billion to benefit US$624 million. In addition, average loan and lease balances increased by US$14 billion QoQ to US$903 billion.

The combined credit and debit card spending jumped 21% to US$201 billion in the quarter. Revenue from the equities division increased by 33% YoY. Also, the bank released US$1.1 billion in reserves kept aside to cover possible loan defaults in the wake of the pandemic.

Bank of America is the second-largest US bank by assets and provides a range of banking and investing services. It serves customers in around 35 countries, including the US.

The BAC stock was up 2.25% to US$44.11 at 9:35 am ET on Thursday.

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Bottomline

The financial sector saw a strong comeback this year, lifted by robust deposits and merger and acquisition activities. Besides, government loans and covid-era paychecks to people helped maintain growth. However, investors should exercise due diligence before investing in stocks.