Bank of America (BAC.US) Q3 results exceeded expectations: transaction revenue surged 12%, net interest income fell slightly

The Zhitong Finance App learned that Bank of America (BAC.US)'s Q3 performance exceeded expectations, thanks to earnings in volatile markets and net interest income that exceeded analysts' expectations. Despite a decline in net interest income, third-quarter revenue increased slightly by less than 1% to $25.49 billion, exceeding market expectations of $25.3 billion. Bank of America's net profit for the third quarter fell 12% from the same period last year to $6.9 billion, or 81 cents per share, partly due to increased loan loss reserves and expenses.

Financial reports show that Bank of America's stock and fixed income, foreign exchange and commodity trading revenue increased 12% in the third quarter, reaching US$4.93 billion, driven by growth in transaction revenue, asset management, and investment banking expenses. Revenue from fixed income transactions increased 8% to $2.9 billion, while revenue from stock trading increased 18% to $2 billion. Investment banking revenue increased 15% and fees rose 18% to reach $1.4 billion, showing strong market demand for trading activities.

Bank of America CEO Brian Moynihan emphasized that the company benefited from year-on-year increases in investment banking and asset management expenses, as well as sales and transaction revenue. Despite a 14% drop in M&A advisory fees, stock and bond issuance revenue increased 16% and 37%, respectively.

Bank of America's credit loss reserve was $1.5 billion, slightly lower than the forecast of $1.57 billion. Net interest income, one of the bank's main revenue sources, fell 2.9% to nearly $14 billion, better than the 3.4% decline expected by analysts. The decline in this indicator is partly due to the Federal Reserve's interest rate hikes over the past two years.

At the end of the third quarter, the bank's loan balance increased to US$1.08 billion, up 2.5% from the same period last year, higher than analysts' estimate of US$1.07 trillion. Bank of America's non-interest expenses increased 4% year over year to nearly $16.5 billion, mainly due to increased revenue-related expenses and investment in employees and technology, and analysts had expected this figure to increase by 4.1%.

According to information, Bank of America's performance reflects the situation of US consumers and businesses in the US when the Federal Reserve is reducing borrowing costs for the first time in nearly five years. Despite geopolitical tension and the uncertainty of the US election, the bank's balance sheet has remained elastic. As of press release, Bank of America rose nearly 2% to $42.63 in the premarket.

It is worth mentioning that last week, the latest earnings reports released by J.P. Morgan Chase and Wells Fargo also exceeded expectations. Executives pointed out that the surge in investment banking and trading business is the key to improving performance. Additionally, Goldman Sachs profit surged 45% in the third quarter due to an unexpected increase in stock trading revenue and a recovery in investment banking. The company's stock trader performance recorded its best quarter in more than three years, and is expected to be the best year ever, while commissions for deal makers have exceeded expectations in every key business area.

Across Wall Street, major banks are showing that they can withstand the adverse effects of interest rate cuts on retail business, while also highlighting the possibility of increased transaction matching, which will drive up charges across the industry.