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Financial institution of America topped estimates for third-quarter revenue on Tuesday on stronger-than-expected curiosity earnings.
This is what the corporate reported:
Earnings per share: 90 cents vs. anticipated 82 cent estimate from LSEG, previously referred to as RefinitivRevenue: $25.32 billion, vs. anticipated $25.14 billion
Revenue rose 10% to $7.8 billion, or 90 cents per share, from $7.1 billion, or 81 cents a share, a 12 months earlier, the Charlotte, North Carolina-based financial institution mentioned in a launch. Income climbed 2.9% to $25.32 billion, edging out the LSEG estimate.
Financial institution of America mentioned curiosity earnings rose 4% to $14.4 billion, roughly $300 million greater than analysts had anticipated, fueled by greater charges and mortgage development. The financial institution’s provision for credit score losses additionally got here in higher than anticipated, at $1.2 billion, underneath the $1.3 billion estimate.
Shares of Financial institution of America rose 2.4% in noon buying and selling.
The outcomes present Financial institution of America prevented main pitfalls associated to mortgage losses and better charges, analyst Mike Mayo of Wells Fargo wrote in a be aware. He referred to as it an “okay quarter” that fell in need of JPMorgan and Citigroup’s outcomes.
Brian Moynihan, CEO of Financial institution of America
Heidi Gutman | CNBC
CEO Brian Moynihan mentioned the second largest U.S. financial institution by belongings continued to develop, regardless of indicators of an financial slowdown.
“We added purchasers and accounts throughout all traces of enterprise,” Moynihan mentioned. “We did this in a wholesome however slowing economic system that noticed U.S. shopper spending nonetheless forward of final 12 months however persevering with to sluggish.”
‘A thorn within the aspect’
Financial institution of America was alleged to be one of many largest beneficiaries of upper rates of interest this 12 months. As an alternative, the corporate’s inventory has been the worst performer amongst its huge financial institution friends in 2023. That is as a result of, underneath Moynihan, the lender piled into low-yielding, long-dated securities throughout the Covid pandemic. These securities misplaced worth as rates of interest climbed.
That is made Financial institution of America extra delicate to the latest surge within the 10-year Treasury yield than its friends — and extra just like some regional banks which are additionally nursing underwater bonds.
Unrealized losses on the lender deepened within the quarter, reaching $131 billion on its portfolio of held-to-maturity bonds. Many of the losses have been tied to mortgage securities.
“Clearly, this held-to-maturity portfolio has been a thorn within the aspect of the inventory,” UBS analyst Erika Najarian mentioned throughout Tuesday’s convention name as she prodded administration for extra particulars on the financial institution.
NII trough
The state of affairs has pressured the financial institution’s internet curiosity earnings, or NII, which is a key metric that analysts will probably be watching this quarter. In July, the financial institution’s CFO, Alastair Borthwick, affirmed earlier steerage that NII can be roughly $57 billion for 2023.
On Tuesday, Borthwick informed analysts that the “excellent news” on internet curiosity earnings is that it’s going to trough within the fourth quarter and start to develop once more in the midst of 2024.
Financial institution of America inventory had fallen 18% this 12 months via Monday, trailing the ten% acquire of rival JPMorgan Chase.
Final week, JPMorgan, Wells Fargo and Citigroup every topped expectations for third-quarter revenue, helped by better-than-expected credit score prices. Morgan Stanley is scheduled to submit outcomes Wednesday.
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Correction: Alastair Borthwick is CFO of Financial institution of America. An earlier model misspelled his title.
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