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Bank of America’s (BAC - Free Report) second-quarter 2024 earnings of 83 cents per share outpaced the Zacks Consensus Estimate of 79 cents. The bottom line compared unfavorably with 88 cents earned in the prior-year quarter.
Shares of the company gained more than 2% in the pre-market trading on better-than-expected results. However, a full day’s trading session will depict a clearer picture.
Despite modest loan growth (loan balances rose 0.5% from the prior-year period) and high interest rates, BofA recorded a decline in net interest income (NII) because of higher deposit costs.
Nevertheless, BofA witnessed a 1.8% year-over-year increase in total deposit balances at the end of the quarter.
Also, total IB fees (in the Global Banking division) of $835 million increased 16.3% year over year, driven by growth in underwriting income (up more than 30% year over year). Advisory services revenues witnessed a 3.3% decline in the quarter.
Similar to the previous quarters, BofA recorded an improvement in trading numbers in second-quarter 2024. Sales and trading revenues (excluding net DVA) grew 6.7% from the prior-year quarter to $4.68 billion. Fixed-income trading fees increased 3%, while equity trading income jumped 19.7%.
Overall, the company’s net income applicable to common shareholders plunged 7.3% from the prior-year quarter to $6.58 billion. Our estimate for the same was $6.34 billion.
Revenues Improve Marginally, Expenses Rise
Net revenues were $25.38 billion, which beat the Zacks Consensus Estimate of $25.19 billion. Also, the top line increased marginally from the prior-year quarter.
NII (fully taxable-equivalent basis) fell 3% year over year to $13.86 billion. Our estimate for NII was $14.06 billion.
Net interest yield contracted 13 basis points (bps) year over year to 1.93%.
Non-interest income increased 5.8% from the prior-year quarter to $11.68 billion. The rise was driven by an increase in fees and commissions. We had projected a non-interest income of $11.13 billion.
Non-interest expenses were $16.31 billion, up 1.7% year over year. Our estimate for non-interest expenses was $16.47 billion.
The efficiency ratio was 64.26%, up from 63.65% in the year-ago quarter. An increase in the efficiency ratio indicates a deterioration in profitability.
Credit Quality Worsens
Provision for credit losses was $1.51 billion, up 34% from the prior-year quarter. We estimated the metric to be $1.35 billion.
Net charge-offs jumped 76.4% year over year to $1.53 billion. As of Jun 30, 2024, non-performing loans and leases as a percentage of total loans were 0.52%, up 13 bps year over year.
Capital Position Strong
Book value per share as of Jun 30, 2024, was $34.39 compared with $32.05 a year ago. Tangible book value per share as of the second-quarter end was $25.37, up from $23.23.
At the end of June 2024, the common equity tier 1 capital ratio (advanced approach) was 13.5%, up from 13.2% as of Jun 30, 2023.
Capital Distribution Update
In the reported quarter, the company returned $5.4 billion to shareholders as dividends and share repurchases.
Our Take
BofA’s focus on digitizing and expanding operations, decent loan growth, and high interest rates are likely to keep aiding growth. However, elevated expenses, higher funding costs and near-term macroeconomic factors pose major headwinds.
Bank of America Corporation Price, Consensus and EPS Surprise
The Bank of New York Mellon Corporation’s (BK - Free Report) second-quarter 2024 adjusted earnings of $1.51 per share surpassed the Zacks Consensus Estimate of $1.43. Also, the bottom line increased 9.4% from the prior-year quarter.
BK’s results were primarily aided by a rise in fee revenues and lower expenses. The assets under custody and/or administration (AUC/A) and assets under management (AUM) balances grew on a solid market rally. However, a decline in net interest revenues hurt BK’s results to some extent.
High interest rates, the resurgence of the investment banking business and solid markets revenues drove JPMorgan’s (JPM - Free Report) second-quarter 2024 adjusted earnings to $4.40 per share. The bottom line handily surpassed the Zacks Consensus Estimate of $4.19.
The results excluded a $2.04 per share net gain related to Visa shares, an 18-cent-per-share donation of Visa shares to pre-fund contributions to the company’s Foundation and net investment securities losses of 14 cents per share. After including these one-time items, earnings were $6.12 per share.
JPM’s equity underwriting fees jumped 56% and debt underwriting fees grew 51%. Also, advisory fees rose 45%. Overall, JPM’s total IB fees were up 50% from the prior-year quarter.
Also, higher interest rates, decent consumer spending and a decent loan balance (up 2% year over year) supported NII in the quarter.
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BofA (BAC) Gains on Q2 Earnings Beat, IB & Trading Fee Growth
Bank of America’s (BAC - Free Report) second-quarter 2024 earnings of 83 cents per share outpaced the Zacks Consensus Estimate of 79 cents. The bottom line compared unfavorably with 88 cents earned in the prior-year quarter.
Shares of the company gained more than 2% in the pre-market trading on better-than-expected results. However, a full day’s trading session will depict a clearer picture.
Despite modest loan growth (loan balances rose 0.5% from the prior-year period) and high interest rates, BofA recorded a decline in net interest income (NII) because of higher deposit costs.
Nevertheless, BofA witnessed a 1.8% year-over-year increase in total deposit balances at the end of the quarter.
Also, total IB fees (in the Global Banking division) of $835 million increased 16.3% year over year, driven by growth in underwriting income (up more than 30% year over year). Advisory services revenues witnessed a 3.3% decline in the quarter.
Similar to the previous quarters, BofA recorded an improvement in trading numbers in second-quarter 2024. Sales and trading revenues (excluding net DVA) grew 6.7% from the prior-year quarter to $4.68 billion. Fixed-income trading fees increased 3%, while equity trading income jumped 19.7%.
Overall, the company’s net income applicable to common shareholders plunged 7.3% from the prior-year quarter to $6.58 billion. Our estimate for the same was $6.34 billion.
Revenues Improve Marginally, Expenses Rise
Net revenues were $25.38 billion, which beat the Zacks Consensus Estimate of $25.19 billion. Also, the top line increased marginally from the prior-year quarter.
NII (fully taxable-equivalent basis) fell 3% year over year to $13.86 billion. Our estimate for NII was $14.06 billion.
Net interest yield contracted 13 basis points (bps) year over year to 1.93%.
Non-interest income increased 5.8% from the prior-year quarter to $11.68 billion. The rise was driven by an increase in fees and commissions. We had projected a non-interest income of $11.13 billion.
Non-interest expenses were $16.31 billion, up 1.7% year over year. Our estimate for non-interest expenses was $16.47 billion.
The efficiency ratio was 64.26%, up from 63.65% in the year-ago quarter. An increase in the efficiency ratio indicates a deterioration in profitability.
Credit Quality Worsens
Provision for credit losses was $1.51 billion, up 34% from the prior-year quarter. We estimated the metric to be $1.35 billion.
Net charge-offs jumped 76.4% year over year to $1.53 billion. As of Jun 30, 2024, non-performing loans and leases as a percentage of total loans were 0.52%, up 13 bps year over year.
Capital Position Strong
Book value per share as of Jun 30, 2024, was $34.39 compared with $32.05 a year ago. Tangible book value per share as of the second-quarter end was $25.37, up from $23.23.
At the end of June 2024, the common equity tier 1 capital ratio (advanced approach) was 13.5%, up from 13.2% as of Jun 30, 2023.
Capital Distribution Update
In the reported quarter, the company returned $5.4 billion to shareholders as dividends and share repurchases.
Our Take
BofA’s focus on digitizing and expanding operations, decent loan growth, and high interest rates are likely to keep aiding growth. However, elevated expenses, higher funding costs and near-term macroeconomic factors pose major headwinds.
Bank of America Corporation Price, Consensus and EPS Surprise
Bank of America Corporation price-consensus-eps-surprise-chart | Bank of America Corporation Quote
Currently, BAC carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Major Banks
The Bank of New York Mellon Corporation’s (BK - Free Report) second-quarter 2024 adjusted earnings of $1.51 per share surpassed the Zacks Consensus Estimate of $1.43. Also, the bottom line increased 9.4% from the prior-year quarter.
BK’s results were primarily aided by a rise in fee revenues and lower expenses. The assets under custody and/or administration (AUC/A) and assets under management (AUM) balances grew on a solid market rally. However, a decline in net interest revenues hurt BK’s results to some extent.
High interest rates, the resurgence of the investment banking business and solid markets revenues drove JPMorgan’s (JPM - Free Report) second-quarter 2024 adjusted earnings to $4.40 per share. The bottom line handily surpassed the Zacks Consensus Estimate of $4.19.
The results excluded a $2.04 per share net gain related to Visa shares, an 18-cent-per-share donation of Visa shares to pre-fund contributions to the company’s Foundation and net investment securities losses of 14 cents per share. After including these one-time items, earnings were $6.12 per share.
JPM’s equity underwriting fees jumped 56% and debt underwriting fees grew 51%. Also, advisory fees rose 45%. Overall, JPM’s total IB fees were up 50% from the prior-year quarter.
Also, higher interest rates, decent consumer spending and a decent loan balance (up 2% year over year) supported NII in the quarter.