Bank of America beats analysts’ profit estimates on retail banking strength

Brian Moynihan, CEO, Bank of America

Scott Mlyn | CNBC

Bank of America posted profit that exceeded analysts’ expectations on strength in its sprawling retail bank. 

The lender generated $7.3 billion in second-quarter profit, an 8% increase from a year earlier, or 74 cents a share, compared with the 71 cent estimate of analysts surveyed by Refinitiv. 

Here’s what Wall Street expected:

  • Earnings: 71 cents a share, a 12.3% increase from a year earlier, according to Refinitiv.
  • Revenue: $23.2 billion, a 2.1% increase from a year earlier.
  • Net interest margin: 2.47% according to FactSet
  • Trading Revenue: Fixed income $2.1 billion, Equities $1.22 billion

How will falling interest rates impact Bank of America?

That’s what analysts and investors are keen to find out when the second biggest U.S. lender by assets reports second-quarter results.

Under CEO Brian Moynihan, the bank managed to deliver record first-quarter profit in April, fueled by the company’s retail lending operations and Moynihan’s cost-cutting initiatives. But the stock took a hit when Chief Financial Officer Paul Donofrio warned investors that growth of net interest income this year would be half the 6% the bank generated in 2018.

Now, after the Federal Reserve recently signaled that it’s likely to cut its benchmark short-term interest rate later this month, the question is, does that further slow the growth in this main profit engine for banks?

This concern coincides with a slowdown in Wall Street trading revenue. Moynihan said in May that second-quarter trading revenue was expected to fall about 8% from the first quarter.

Bank of America shares have climbed 18% so far this year, but are lower than when the bank made its revenue warning in April.

Earlier this week, Citigroup, J.P. Morgan Chase, Wells Fargo, and Goldman Sachs all beat analysts’ profit expectations as the firms benefited from one-time gains including a gain on the IPO of electronic market maker Tradeweb.

This is breaking news. Please check back for updates.

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