Bank of America's Earnings, Revenue Grow More Than Expected -- 3rd Update

By Rachel Louise Ensign Features Dow Jones Newswires

Bank of America Corp. said its second-quarter profit climbed 10% as the bank continued to pocket gains from Federal Reserve rate hikes.

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Quarterly profit at the Charlotte, N.C.-based bank was $5.27 billion, compared with $4.78 billion a year ago. Per share, earnings were 46 cents. Analysts had expected 43 cents a share.

Second-quarter revenue was $22.83 billion, up from $21.29 billion a year ago. On an adjusted basis, revenue was $23.07 billion, compared with analysts' expectations of $21.78 billion.

Bank of America's large base of U.S. deposits and rate-sensitive mortgage securities makes it particularly poised to benefit from an uptick in interest rates, which recently started rising after years of record lows.

The bank's net interest income rose 8.6% from the year-ago period to $10.99 billion, helped by the fact that it still hasn't started to pay significantly higher rates to depositors. But it fell slightly from the first quarter. The rate the bank paid on U.S. interest-bearing deposits was 0.11%, compared to 0.09% in the prior quarter. The Federal Reserve raised short-term interest rates, which influence the rate the bank earns on loans and securities, twice so far in 2017.

Bank of America shares have rallied of late, climbing 41% since the November election. The initial share-price gains after Donald Trump's surprise victory have been sustained as the lighter regulatory touch investors hoped for has started to materialize. Short-term interest rates have also kept moving higher with the jobs picture strengthening, aiding the bank's results.

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In late June, Bank of America got Federal Reserve approval for a large increase in its dividend and stock buybacks. Since then, the bank's stock has regularly traded above its book value, a level it never reached between the financial crisis and the start of 2017.

But the lender, the second largest U.S. bank by assets, faced challenges in the second quarter. Trading revenue at Bank of America, excluding an accounting adjustment, fell 9% to $3.37 billion from $3.7 billion in the second quarter of last year. The drop was, however, less than some analysts predicted. Similar factors weighed on earnings reports from J.P. Morgan Chase & Co. and other big lenders that reported their earnings on Friday.

Loans at the bank were up 1.5% from a year earlier. Loan growth has slowed down across the banking industry, though there's no consensus as to why.

Investment banking fees rose 8.8% from a year earlier.

Quarterly expenses rose 1.7% to $13.73 billion, from $13.49 billion a year ago. Chief Executive Brian Moynihan has made cost cutting a key tenet of his business strategy, and last year he promised to cut another $5 billion in annual expenses by 2018.

Shares moved 0.6% lower in premarket trading.

Write to Rachel Louise Ensign at rachel.ensign@wsj.com

(END) Dow Jones Newswires

July 18, 2017 08:02 ET (12:02 GMT)