Bank of America reports profit beat, revenue miss

BofA Counters Trading Slump With Gains in Consumer Banking

BofA Counters Trading Slump With Gains in Consumer Banking

Shares of Bank of America Corp. dropped 0.7% in premarket trading Wednesday, after the bank reported a second-quarter profit that beat expectations but revenue that came up a bit short.

Meanwhile, overall revenue matched analyst estimates to grow by 2.1% to reach $23.2bn.

That comes to per share profit of $0.74 on revenue of $23.1 billion.

Other lenders including JPMorgan Chase & Co. and Citigroup Inc. posted earnings this week that also showed strong consumer spending and borrowing but some weakness in corporate activity.

According to the bank's CEO (see commentary below), the better value is partly due to the fact that Bank of America took 7% of its shares off the market in the last 12 months through share buybacks (fewer shares = higher earnings per share).

"Our view of the economy reflects the activity by the one-in-two American households we serve, which points to a steadily growing economy", said Brian Moynihan, chief executive of the lender. Some companies were affected by the continuing trade battles between the USA and its trading partners, he said.

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In the absence of higher interest rates to help pad revenue, banks can improve margins by reducing expenses. That is because banks were able to charge borrowers more interest without having to significantly increase payouts to depositors.

The Fed raised benchmark lending rates four times a year ago but markets believe it is virtually certain to backtrack and make a cut later this month.

Global Banking net income of $1.93B fell from $2.03B in Q1 and $2.11B in Q2 2018.

Feeding into the results was a 13% jump in net income at the consumer banking business to $3.3 billion. Executives said lower long-term rates and any Fed rate cuts would cut into net interest income growth this year. That's up mildly from 0.73% a year earlier. Expenses were roughly flat.

Shares of Bank of America rose 0.6 percent to $29.15 in early trading. Trading revenue fell about 10%.

Bank of America reported second quarter profit growth on Wednesday that beat analysts' estimates as the banking giant's consumer banking division drove growth.

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