Bank of America-Investment Bank Estimates Q2 Earnings, Company News

July 18 (Reuters) – Bank of America (BofA) posted a drop in second-quarter profit on Monday due to a drop in revenue at its investment bank as business shrank to a record high last year.

Wall Street investment bankers watched last year’s record trading volumes fall in the first half of 2022 amid market volatility, geopolitical tensions and a sense of loss.

Profit attributable to shareholders of Bank of America fell to $5.93 billion (€5.86 billion), or 73 cents a share, in the quarter ended June 30, from $8.96 billion, or $1.03 per share, a year earlier.

Bank of America’s investment banking fees fell 47% to $1.1 billion in the quarter amid falling stock prices and a slowdown in mergers and acquisitions.

Its earnings before interest expense rose 6% to $22.7 billion over the same period.

The US Federal Reserve quickly raised interest rates to curb record inflation. If the risk of a recession persists, the measure for now means increased profits for banks, which normally benefit from high interest rates.

Bank of America’s net interest income, which measures the difference between interest earned on loans and the amount paid out on deposits, jumped 22%, or $2.2 billion, to $12.4 billion.

Due to the structure of its balance sheet, the group is more sensitive to changes in interest rates than major US banks.

“Our U.S. retail customers remain resilient, deposit balances and spending levels remain strong,” said Chief Executive Brian Moynihan.

However, the resilience of American consumers is being tested by inflation, which has reached levels not seen in four decades, but spending trends have largely persisted, boosting bank profits.

Spending trends are a key indicator of consumers’ financial health and are closely linked to the performance of the retail banking business, which saw revenue rise 12% to $9.1 billion in the second quarter.

The bank’s combined credit and debit card spending jumped to $220.5 billion, up 11% from the previous quarter and up 10% year over year.

The group recorded average deposits of more than $1,000 billion, up 10% from the previous year.

The Fed’s aggressive stance on reducing inflation, however, puts credit forecasts in limbo, as rapidly rising borrowing costs could weigh on demand.

Bank of America, the second-largest U.S. bank by assets, released $48 million in provisions this quarter, down from $2.2 billion a year earlier, leaving total loan loss provisions at $500 million.

The bank stands out among rivals JPMorgan Chase & Co and Wells Fargo & Co, which increased their loss reserves by $428 million and $235 million, respectively, in the quarter.

Titleholder Bank of America, which has fallen nearly 28% since the start of the year, was steady in forecourt trading. (Reporting by Manya Saini and Niket Nishant in Bangalore, Elizabeth Dilts Marshall in New York; French editing by Dagmara Makkos Editing by Kate Entringer)