We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
BofA (BAC) Q3 Earnings Top on Solid Trading, IB & NII, Stock Up
Read MoreHide Full Article
Bank of America’s (BAC - Free Report) third-quarter 2023 earnings of 90 cents per share handily outpaced the Zacks Consensus Estimate of 80 cents. The bottom line compared favorably with 81 cents earned in the prior-year quarter.
Shares of the company are up almost 1% in the pre-market trading.
Driven by modest loan growth (loan balances up 2% from the prior-year period) and rising interest rates, BofA recorded a better-than-expected growth in net interest income (NII). On the other hand, the rise in funding costs weighed on NII to some extent as the company’s interest expenses jumped significantly.
Like the second quarter of 2023, BofA bucked the trend plaguing other Wall Street biggies like JPMorgan (JPM - Free Report) and Citigroup (C - Free Report) and came out with impressive investment banking (IB) and trading numbers this time too.
Total IB fees (in the Global Banking division) of $743 million grew 2% year over year in the quarter on the back of relatively stable advisory fees and robust equity underwriting performance, which surged 64%. On the other hand, weakness in fixed income underwiring (down 7%) remained.
Sales and trading revenues (excluding net DVA) were up 8% from the prior-year quarter to $4.4 billion. Fixed-income trading fees rose 6% and equity trading income jumped 10%.
During the quarter, BofA witnessed a 3% decline in deposit balances as customers continued to rotate toward high-yielding investment options.
Overall, the company’s net income applicable to common shareholders grew 11% from the prior-year quarter to $7.3 billion. Our estimate for the same was $6.3 billion.
Revenues Improve, Expenses Rise
Quarterly net revenues were $25.17 billion, which beat the Zacks Consensus Estimate of $25.08 billion. The top line grew 3% from the prior-year quarter.
NII (fully taxable-equivalent basis) rose 5% to $14.53 billion, driven by higher interest rates and loan growth. Our estimate for NII was $14.26 billion.
Net interest yield expanded 5 basis points (bps) to 2.11%. We had expected the metric to be 2.08%.
Non-interest income increased marginally to $10.79 billion. The rise was mainly attributable to higher sales and trading revenues and asset management fees, partly offset by a decline in other income. We had projected non-interest income of $10.43 billion.
Non-interest expenses were $15.83 billion, up 4%. The rise was due to an increase in almost all cost components. Our estimate for non-interest expenses was $15.81 billion.
The efficiency ratio was 62.93%, down from 62.45% in the year-ago quarter. An increase in the efficiency ratio indicates a deterioration in profitability.
Credit Quality Worsening
Provision for credit losses was $1.23 billion, up 37% from the prior-year quarter. Our estimate for the metric was $1.24 billion.
Net charge-offs (NCOs) jumped 79% to $931 million. We had projected NCOs of $849 million.
As of Sep 30, 2023, non-performing loans and leases as a percentage of total loans were 0.46%, up 7 bps year over year.
Capital Position Strong
Book value per share as of Sep 30, 2023, was $32.65 compared with $29.96 a year ago. Tangible book value per share as of the third-quarter end was $23.79, up from $21.21.
At the end of September 2023, the common equity tier 1 capital ratio (advanced approach) was 13.5%, up from 12.6% as of Sep 30, 2022.
Capital Distribution Update
During the reported quarter, the company returned $2.9 billion to shareholders in dividends and share repurchases.
Our Take
BofA’s focus on digitizing and expanding operations, decent loan growth and higher interest rates are likely to keep supporting growth. However, elevated expenses, rising funding costs and near-term macroeconomic factors pose major headwinds.
Bank of America Corporation Price, Consensus and EPS Surprise
Citigroup's third-quarter 2023 earnings per share (excluding divestiture-related impacts) of $1.52 outpaced the Zacks Consensus Estimate of $1.26.
In the third quarter, Citigroup witnessed a rise in revenues due to higher revenues in the Institutional Clients Group, as well as the Personal Banking and Wealth Management segments. The higher cost of credit was a spoilsport.
Support from higher interest rates, the First Republic Bank deal, robust consumer and commercial banking businesses and solid loan balance drove JPMorgan’s third-quarter 2023 earnings to $4.33 per share. The bottom line handily outpaced the Zacks Consensus Estimate of $3.89.
The results included net investment securities losses and legal expenses. After excluding these, JPM’s earnings were $3.94 per share.
Unique Zacks Analysis of Your Chosen Ticker
Pick one free report - opportunity may be withdrawn at any time
Image: Bigstock
BofA (BAC) Q3 Earnings Top on Solid Trading, IB & NII, Stock Up
Bank of America’s (BAC - Free Report) third-quarter 2023 earnings of 90 cents per share handily outpaced the Zacks Consensus Estimate of 80 cents. The bottom line compared favorably with 81 cents earned in the prior-year quarter.
Shares of the company are up almost 1% in the pre-market trading.
Driven by modest loan growth (loan balances up 2% from the prior-year period) and rising interest rates, BofA recorded a better-than-expected growth in net interest income (NII). On the other hand, the rise in funding costs weighed on NII to some extent as the company’s interest expenses jumped significantly.
Like the second quarter of 2023, BofA bucked the trend plaguing other Wall Street biggies like JPMorgan (JPM - Free Report) and Citigroup (C - Free Report) and came out with impressive investment banking (IB) and trading numbers this time too.
Total IB fees (in the Global Banking division) of $743 million grew 2% year over year in the quarter on the back of relatively stable advisory fees and robust equity underwriting performance, which surged 64%. On the other hand, weakness in fixed income underwiring (down 7%) remained.
Sales and trading revenues (excluding net DVA) were up 8% from the prior-year quarter to $4.4 billion. Fixed-income trading fees rose 6% and equity trading income jumped 10%.
During the quarter, BofA witnessed a 3% decline in deposit balances as customers continued to rotate toward high-yielding investment options.
Overall, the company’s net income applicable to common shareholders grew 11% from the prior-year quarter to $7.3 billion. Our estimate for the same was $6.3 billion.
Revenues Improve, Expenses Rise
Quarterly net revenues were $25.17 billion, which beat the Zacks Consensus Estimate of $25.08 billion. The top line grew 3% from the prior-year quarter.
NII (fully taxable-equivalent basis) rose 5% to $14.53 billion, driven by higher interest rates and loan growth. Our estimate for NII was $14.26 billion.
Net interest yield expanded 5 basis points (bps) to 2.11%. We had expected the metric to be 2.08%.
Non-interest income increased marginally to $10.79 billion. The rise was mainly attributable to higher sales and trading revenues and asset management fees, partly offset by a decline in other income. We had projected non-interest income of $10.43 billion.
Non-interest expenses were $15.83 billion, up 4%. The rise was due to an increase in almost all cost components. Our estimate for non-interest expenses was $15.81 billion.
The efficiency ratio was 62.93%, down from 62.45% in the year-ago quarter. An increase in the efficiency ratio indicates a deterioration in profitability.
Credit Quality Worsening
Provision for credit losses was $1.23 billion, up 37% from the prior-year quarter. Our estimate for the metric was $1.24 billion.
Net charge-offs (NCOs) jumped 79% to $931 million. We had projected NCOs of $849 million.
As of Sep 30, 2023, non-performing loans and leases as a percentage of total loans were 0.46%, up 7 bps year over year.
Capital Position Strong
Book value per share as of Sep 30, 2023, was $32.65 compared with $29.96 a year ago. Tangible book value per share as of the third-quarter end was $23.79, up from $21.21.
At the end of September 2023, the common equity tier 1 capital ratio (advanced approach) was 13.5%, up from 12.6% as of Sep 30, 2022.
Capital Distribution Update
During the reported quarter, the company returned $2.9 billion to shareholders in dividends and share repurchases.
Our Take
BofA’s focus on digitizing and expanding operations, decent loan growth and higher interest rates are likely to keep supporting growth. However, elevated expenses, rising 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
Citigroup's third-quarter 2023 earnings per share (excluding divestiture-related impacts) of $1.52 outpaced the Zacks Consensus Estimate of $1.26.
In the third quarter, Citigroup witnessed a rise in revenues due to higher revenues in the Institutional Clients Group, as well as the Personal Banking and Wealth Management segments. The higher cost of credit was a spoilsport.
Support from higher interest rates, the First Republic Bank deal, robust consumer and commercial banking businesses and solid loan balance drove JPMorgan’s third-quarter 2023 earnings to $4.33 per share. The bottom line handily outpaced the Zacks Consensus Estimate of $3.89.
The results included net investment securities losses and legal expenses. After excluding these, JPM’s earnings were $3.94 per share.