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BAC’s Balance Sheet Expanded with Strong Credit Quality

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Balance sheet expansion

Bank of America’s (BAC) total assets grew ~2.4% YoY (year-over-year) in the third quarter and reached ~$2.34 trillion. This increase was driven by higher deposits, new assets, and rate spreads. 

Bank of America’s deposits in the third quarter grew 3.5% YoY to $1.32 trillion. Its deposits benefited from an improving US economy, as represented by a strong GDP growth rate of 4.2% in the second quarter and a healthy jobs market.

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Lagging growth in lending

Bank of America’s (BAC) total loan book grew just 0.3% year-over-year to $930.0 billion. The benefit from increased lending in its Consumer Banking, Wealth Management, and Commercial segments was almost entirely offset by weakness in its mortgage loans and a decline in loans to its market business customers.

The bank’s loan growth also lagged its peers (XLF). JPMorgan Chase (JPM) and Citigroup (C) registered increases of 6.0% and 4.0%, respectively, in their loan growth figures. Wells Fargo (WFC) recorded a 1.0% YoY decline in its third-quarter average loans.

Credit quality improved

Although credit offtake for Bank of America (BAC) remained sluggish, overall credit quality improved for the bank in the third quarter. Provisions for credit losses fell 14.1% YoY and 13.4% sequentially to $716.0 million due to improvements in the loan quality of its consumer real estate and energy portfolios.

The company’s nonperforming assets fell to $5.4 billion in the third quarter from $6.9 billion in the third quarter of 2017 and $6.2 billion in the second quarter. This decrease was primarily due to the improved quality of its consumer and commercial loan portfolios.

Enhancing shareholder returns

Bank of America (BAC) paid $0.15 in dividends per share in the third quarter, up from $0.12 in the third quarter of 2017. This payout translates into an annualized yield of 2.1%.

Year-to-date, the bank has returned $18.9 billion to its common shareholders in the form of share buybacks and dividend payments. Bank of America repurchased $14.9 billion in common shares and paid $4.0 billion in dividends.

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