Strength of diversified model
Bank of America (BAC) reported a stellar 33% rise in net income in the second quarter, beating estimated EPS of $0.61 with $0.63 today. The bank posted 3% growth in adjusted revenues on net interest income growth of 6%, partially offset by a 7% decline in non-interest income. It’s the only major bank that has posted a sequential rise in EPS on higher repurchases and a marginal decline in net. The net income benefited from improved operating efficiency, investments in technology helping penetration across products, and lower taxes.
Bank of America’s banking reach and loan book expanded in the second quarter on corporate and retail lending. The bank’s loan book grew 7%, in line with JPMorgan Chase’s (JPM) growth. Deposits went up 5%. Citigroup (C) and Wells Fargo (WFC) saw marginal loan book expansion in the second quarter.
BofA’s consumer banking segment managed 42% growth in net to $2.9 billion on revenue growth of 8%, lower spending, and lower income taxes—partially offset by higher provisions. Merrill Lynch’s brokerage assets saw a rise of 20% on growth in broad equities and client expansion.
The bank also expanded net 16% in the Global Banking segment, helped by loans growth and higher spreads, partially offset by an 11% decline in non-interest income.
Trading and wealth
BofA’s Global Market segment saw a sequential net decline to $1.3 billion on lower trading in equities compared to the first quarter. The bank continues to invest heavily in technology to improve returns and expand assets under management through varied offerings. On a year-over-year basis, equities saw a 17% jump in trading. Fixed-income currencies and commodities saw 2% growth, affected by rising rates.
Asset managers (XLF) have seen lower flows and outflows in recent months, owing to high valuations and trade war concerns. BofA’s saw $10.8 billion in new flows. Its total managed assets increased 5% to $2.8 trillion on a rise in valuations and new infusions. On a pre-tax basis, its net remained largely flat at $1.3 billion.