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Bank of America (BAC) Q2 2022 Earnings

Bank of America said on Monday that its second-quarter results benefited from rising interest rates, but profits were down by about $425 million in charges linked to regulatory matters.

Here’s what the company reported compared to what Wall Street expected, based on a survey of analysts by Refinitiv:

  • Earnings per share: 78 cents adjusted vs. 75 cents expected per share
  • Revenue: $22.79 billion vs. $22.67 billion expected

Profit fell 32% to $6.25 billion, or 73 cents a share, from a year earlier as the company took a $523 million provision for credit losses. A year ago, the bank made a $1.6 billion profit as borrowers proved more creditworthy than expected.

Excluding the impact of regulatory costs, the bank earned 78 cents per share, higher than analysts had expected.

Revenue rose 5.6 percent to $22.79 billion, beating analysts’ expectations, as net interest income rose 22 percent to $12.4 billion on higher interest rates and loan growth. That number could rise by $900 million or $1 billion in the third quarter and at least as much in the fourth quarter, CFO Alastair Borthwick told analysts on a conference call Monday.

The lender’s shares rose about 2.8% in Monday trading.

“Stable customer activity in our businesses, combined with higher interest rates, led to strong growth in net interest income and allowed us to perform well in a weakened capital markets environment,” CEO Brian Moynihan said in the release.

“Our US consumer clients remained resilient with continued strong deposit balances and spending levels. Loan growth continued across our franchise and our markets teams helped clients navigate significant volatility reflecting economic uncertainty.”

Bank of America, which Moynihan has led since 2010, has enjoyed headwinds as rising interest rates and a recovery in loan growth have boosted revenue. But banking stocks have been hammered this year amid concerns that high inflation will spark a recession, leading to higher loan defaults.

Non-interest expense in the quarter rose 2% from a year earlier, as the company reported about $425 million in costs tied to regulatory matters. About half of that figure was linked to fines announced last week totaling $225 million over how the bank handled unemployment benefits during the pandemic. The rest has to do with an industry-wide survey of sales staff who use messaging apps.

Similar to peers Morgan Stanley and JPMorgan Chase, Bank of America saw investment banking fees fall 47% to $1.1 billion, just below StreetAccount’s estimate of $1.24 billion.

Fixed income trading revenue rose 19% to $2.3 billion and equity revenue rose 2% to $1.7 billion, both broadly in line with analysts’ expectations.

In addition, large write-downs in financial assets have begun to show up in the bank’s results in the quarter, with Wells Fargo saying “market conditions” forced it to write down $576 million worth of equity. JPMorgan said last week it had written down $257 million in bridge loans for leveraged buyout clients.

On Monday, Bank of America reported “mark-to-market losses related to leveraged financial positions,” but did not immediately disclose a figure for the losses. Last month, Borthwick said the bank would likely post a $150 million write-down on its buyout loans.

Bank of America shares have fallen 28% this year through Friday, worse than the 16% drop in the KBW Bank index.

Last week, JPMorgan and Wells Fargo reported second-quarter profit drops as banks set aside more capital for expected loan losses, while Morgan Stanley disappointed after a bigger-than-expected slowdown in investment banking. Citigroup beat revenue expectations as it benefited from rising interest rates and strong trading results.

Bank of America (BAC) Q2 2022 Earnings

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