Unveiling Bank of America’s (BAC) 3Q 2023 Earnings: Promising Financial Insights Await!

Bank of America exceeded expectations for its third-quarter profit due to stronger-than-expected interest income.

Here’s what the company reported:

• Earnings per share: 90 cents vs. the expected estimate of 82 cents from LSEG, which was formerly known as Refinitiv
• Revenue: $25.32 billion, compared to the expected $25.14 billion

Profit increased by 10% to $7.8 billion, or 90 cents per share, from $7.1 billion, or 81 cents per share, in the previous year, according to a press release by the Charlotte-based bank. Additionally, revenue rose by 2.9% to $25.32 billion, surpassing the LSEG estimate.

Bank of America stated that interest income rose by 4% to $14.4 billion, which is approximately $300 million more than what analysts had anticipated, driven by higher rates and loan growth.

Shares of Bank of America increased by 1% in premarket trading.

The CEO, Brian Moynihan, mentioned that despite signs of an economic slowdown, the second largest bank in the U.S. by assets continues to grow. Moynihan added, “We acquired new clients and accounts across all lines of business. We were able to achieve this in a healthy but slowing economy, where U.S. consumer spending still outperformed last year but continued to decline.”

Bank of America was expected to be one of the major beneficiaries of higher interest rates this year. However, the company’s stock performance in 2023 has been the worst among its peers in the banking industry. This is due to the bank’s investment in low-yielding, long-dated securities during the Covid pandemic, which lost value as interest rates increased.

As a result, Bank of America became more sensitive to the recent surge in the 10-year Treasury yield, similar to some regional banks that are also struggling with underwater bonds. At midyear, Bank of America had more than $100 billion in paper losses on bonds, according to Bloomberg.

This situation has put pressure on the bank’s net interest income (NII), a key metric that analysts will closely monitor this quarter. In July, the bank’s CFO, Alistair Borthwick, confirmed previous guidance that NII would be around $57 billion for 2023.

Bank of America shares experienced a 1% increase in premarket trading on Tuesday. The stock has declined by 18% this year, while rival JPMorgan Chase has seen a 10% gain.

Last week, JPMorgan, Wells Fargo, and Citigroup exceeded expectations for their third-quarter profit, aided by better-than-expected credit costs. Morgan Stanley is scheduled to report results on Wednesday.

This story is developing. Please check back for updates.

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