A month has gone by since the last earnings report for Bank of America (BAC Quick QuoteBAC - Free Report) . Shares have added about 7.2% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Bank of America due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Bank of America Q3 Earnings Beat, IB & Trading Fee Growth

Bank of America’s third-quarter 2024 earnings of 81 cents per share surpassed the Zacks Consensus Estimate of 78 cents. The bottom line compared unfavorably with 90 cents earned in the prior-year quarter.

Behind Headline Numbers

Total IB fees (in the Global Banking division) of $783 million increased 5.4% year over year, driven by growth in underwriting income (up 24.5%). Advisory services revenues witnessed an 11.4% decline in the quarter.

Similar to the previous quarters, Bank of America recorded an improvement in trading numbers in the third quarter. Sales and trading revenues (excluding net DVA) grew 11.7% to $4.94 billion. Fixed-income trading fees increased 8%, while equity trading income jumped 17.8%.

These turned out to be major revenue growth drivers. Further, Bank of America witnessed a 2.4% year-over-year increase in total deposit balances to $1.93 trillion.

On the other hand, despite decent loan growth (loan balances rose 2.6%) and high interest rates, BofA recorded a decline in NII because of higher deposit costs.

The company’s net income applicable to common shareholders plunged 12.2% from the prior-year quarter to $6.38 billion. Our estimate for the same was $6.12 billion.

Revenues Improve, Expenses Rise

Net revenues were $25.35 billion, which beat the Zacks Consensus Estimate of $25.29 billion. Also, the top line increased almost 1% from the prior-year quarter.

NII (fully taxable-equivalent basis) fell 2.9% to $14.11 billion. Our estimate for NII was $14.27 billion. Net interest yield contracted 19 basis points (bps) year over year to 1.92%. 

Non-interest income increased 5.5% to $11.38 billion. The rise was driven by an increase in total fees and commissions. We had projected a non-interest income of $10.98 billion.

Non-interest expenses were $16.48 billion, up 4%. Our estimate for non-interest expenses was $16.34 billion.

The efficiency ratio was 64.64%, up from 62.55% in the year-ago quarter. An increase in the efficiency ratio indicates a deterioration in profitability.

Credit Quality Worsens

Provision for credit losses was $1.54 billion, up 25% from the prior-year quarter. We estimated the metric to be $1.44 billion.

Net charge-offs jumped 64.8% to $1.53 billion. As of Sept. 30, 2024, non-performing loans and leases as a percentage of total loans were 0.53%, up 7 bps.

Capital Position Strong

Book value per share as of Sept. 30, 2024, was $35.37 compared with $32.65 a year ago. Tangible book value per share end was $26.25, up from $23.79.

At the end of September 2024, the common equity tier 1 capital ratio (advanced approach) was 13.5%, stable year over year.

Share Repurchase Update

In the reported quarter, the company repurchased shares worth $3.5 billion.

Outlook

The company expects a modest loan and deposit growth in 2024.

Based on the assumptions of two rate cuts in the quarters, the company expects NII to grow sequentially in the fourth quarter of 2024 and be $14.3 billion or more. In 2025, NII is expected to witness a steady improvement.

The company expects to spend nearly $4 billion on technology initiatives in 2024. Total non-interest expenses in the fourth quarter are expected to be stable at $16.5 billion on a sequential basis.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month.

VGM Scores

Currently, Bank of America has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Charting a somewhat similar path, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Bank of America has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Bank of America is part of the Zacks Financial - Investment Bank industry. Over the past month, JPMorgan Chase & Co. (JPM Quick QuoteJPM - Free Report) , a stock from the same industry, has gained 7.8%. The company reported its results for the quarter ended September 2024 more than a month ago.

JPMorgan Chase & Co. reported revenues of $42.65 billion in the last reported quarter, representing a year-over-year change of +7%. EPS of $4.37 for the same period compares with $4.33 a year ago.

For the current quarter, JPMorgan Chase & Co. is expected to post earnings of $3.81 per share, indicating a change of -4% from the year-ago quarter. The Zacks Consensus Estimate has changed +0.1% over the last 30 days.

JPMorgan Chase & Co. has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of F.