Bank of America profit surges 19% on higher interest income

Net income jumped to $7.4bn as revenue, net of interest expense, increased 11% to $25.2bn

Bank of America's revenue increased 11 per cent on an annual basis to $25.2 billion in the past quarter. AP

Bank of America, the second-largest US bank by assets, has reported an annual 19 per cent jump in its second-quarter net profit on higher net interest income.

The North Carolina-based lender’s net profit surged to $7.4 billion, or $0.88 a diluted share, in the three months to June 30 while revenue rose by 11 per cent on an annual basis to $25.2 billion in the past quarter.

Net interest income surged 14 per cent to $14.2 billion, driven by loan growth, the lender said.

The bank’s share price, which has dropped 12.26 per cent since the start of the year, was trading 0.68 per cent higher at $29.60 in pre-market trading on Tuesday.

“We delivered one of the strongest quarters and first-half net income periods in the company’s history,” chairman and chief executive Brian Moynihan said.

“We continue to see a healthy US economy that is growing at a slower pace, with a resilient job market.

“All businesses performed well and we saw improved market shares, particularly in our sales and trading and investment banking businesses. A strong balance sheet and ample liquidity allowed us to continue investments in our franchise to drive long-term value for stakeholders.”

The consumer banking division added $2.9 billion, or 39.1 per cent, to the bank's total net income. It added about 157,000 new consumer current accounts in the second quarter, the 18th consecutive quarter of growth.

In the previous quarter, Bank of America registered record digital log-ins that exceeded 3 billion, up 11 per cent.

The bank’s digital sales represented 51 per cent of total sales while overall consumer investment assets increased by 23 per cent to $387 billion, the lender said.

The net income of its global banking and markets divisions increased to $2.7 billion and $1.1 billion, respectively.

“Our focus remains on growing our businesses organically by deepening existing client relationships, establishing new relationships and driving operating leverage,” chief financial officer Alastair Borthwick said.

“Asset quality and the overall health of the US consumer remained strong. Total loss rates remained below pre-pandemic levels. Our balance sheet remained strong with $190 billion of regulatory capital and a CET1 [Common Equity Tier-1] ratio nearly 120 basis points above our current minimum requirements.”

CET1 is a key measure of a bank's capital strength.

The bank returned more than $2.3 billion to shareholders in dividends and share repurchases from April to June.

It also announced plans to increase its quarterly common stock dividend by 9 per cent in third quarter, subject to the approval of its board of directors.

The US Federal Reserve increased its benchmark rate for the 10th consecutive time in May in an attempt to bring inflation down to its target range of 2 per cent after prices hit a four-decade high of 9.1 per cent in June 2022.

It has raised rates aggressively by a combined 500 basis points over the past 16 months, their highest since 2007, shortly before the start of the 2008 global financial crisis.

Earlier this month, the Fed hit pause on raising interest rates for the first time since it started its monetary tightening cycle in March 2022, to assess the effect on the economy.

However, it signalled it would resume this year if needed. Its next meeting will be held on July 25 and July 26.

Separately, Morgan Stanley said its second-quarter net income fell by about 12 per cent to $2.2 billion, from the same period a year ago, due to severance costs of $308 million associated with an employee action.

“The firm delivered solid results in a challenging market environment. The quarter started with macroeconomic uncertainties and subdued client activity, but ended with a more constructive tone,” said its chairman and chief executive James Gorman on Tuesday.

“Consistent with our strategy, we continued to attract client assets … we finished the quarter in a strong capital position and raised our quarterly common dividend by 7.5 cents for the second year in a row. We remain confident in our ability to grow in various market environments while maintaining a strong capital position.”

The investment bank added $100 billion in net new assets, bringing in more than $200 billion so far this year, while net revenue increased by an annual 2.5 per cent to $13.5 billion in the second quarter.