Bank of America profit beats as healthy economy fuels loan growth

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The New York-listed bank reported a second-quarter net profit of $7.3bn, an 8% increase from the year before, or 74 cents per share, which eclipsed the 71 cent estimate from analysts surveyed by Refinitiv.

But warning signs also emerged with JPMorgan (JPM.N), Citigroup (C.N) and Well Fargo reporting a dip in margins, stoking fears that interest rate cuts could further pressure profit by narrowing the spread between what banks charge on loans and pay on deposits.

Bank of America is one of the world's leading financial institutions, serving individual consumers, small and middle-market businesses and large corporations with a full range of banking, investing, asset management and other financial and risk management products and services. Its net interest income will probably rise 1% this year if the Fed cuts rates twice in 2019, down from the 3% jump it expected in April, Chief Financial Officer Paul Donofrio said on a call with analysts Wednesday.

Higher interest rates have boosted banks' performance since the Fed started raising them in late 2015.

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Bank of America managed to keep a lid on interest-rate increases to customers in the second quarter.

Net interest income, or the difference between what the bank makes from loans or investments and the interest paid to depositors, rose 3% from a year earlier but fell about 1.5% from the prior quarter.

Profit in its global banking division declined 9% to $1.93 billion on a drop in capital markets deals.

"We see solid consumer activity across the board, with spending by Bank of America consumers up 5% this quarter over the second quarter of a year ago", Chief Executive Brian Moynihan said in a statement. Excluding items, the bank earned 75 cents per share. Total revenue increased 2.4% to $23.08 billion, just below the FactSet consensus of $23.11 billion, while net interest income rose 3.1% to $12.19 billion but missed expectations of $12.36 billion. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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