Bank of America has been quietly doing things right it seems. Third quarter results on Monday were a good illustration of its steady, deliberate progress.
Like rivals, Bank of America was given a big helping hand by the Federal Reserve’s interest rate increases, which have fueled strong growth in income from lending. But Bank of America is also holding on to more fees and commissions than peers and it saw a smaller swing in loan loss provisions compared with the same period last year.
The upshot: Overall revenue after provisions looks more stable than rivals and grew year on year in spite of the slowdown in investment banking and some trading in the midst of worries about a deteriorating economy.
Bank of America’s net interest income jumped 24%, or $2.7 billion, in the third quarter compared with the same period last year to $13.8 billion. As with JPMorgan Chase & Co., NII was a record for a single quarter and benefitted from loan growth as well as higher rates.
The investment bank and trading divisions separate Bank of America from its peers. This is where the bank has been on a slow and steady mission of adding people and trying to take market share. The considered approach meant a less spectacular rise in advisory fees and trading revenue during the investment banking boom of 2020 and 2021, but there’s also less of a decline now. While other banks look at potential job cuts, Bank of America said it had no plans to get rid of any traders or bankers.
Its trading desks were busy with government bonds, interest-rate derivatives and currencies—the so-called macro business, which has been a bright spot for banks all year as investors try to deal with the fallout from high inflation and a volatile global economy. Revenue here was up 27% for Bank of America compared with the same period last year. That was better than rivals apart from Morgan Stanley, which reported 33% revenue growth last Friday. Goldman Sachs, traditionally among the strongest in this field, reports its third quarter on Tuesday.
Bank of America’s equity trading revenue meanwhile held up better than rivals: It reported just a 4% decline, ahead of JPMorgan’s more than 11% slide, which was the next best.
Investment banking fees for advice on deals or fund raisings have collapsed everywhere after the records set in 2021. But even here Bank of America beat rivals: Its revenue tumbled 46%, which was marginally less bad than JPMorgan and so much less bad than Citigroup Inc. or Morgan Stanley.
