Financial services giant Bank of America (BAC 0.36%) reported third-quarter earnings Tuesday, Oct. 15, that topped analyst estimates on both top and bottom lines. Despite the earnings beat, the report noted some mixed results, especially when compared to 2023.
Net income came in at $6.9 billion (an 11.5% drop year over year) while there was a slight increase in total revenue to $25.3 billion from $25.2 billion the year before. The quarter saw a 3% drop in net interest income to $14 billion, impacted by rising deposit costs.
Overall, the quarter demonstrated resilience in growing revenue despite setbacks in net interest income.
| Metric | Q3 2024 | Analysts' Estimate | Q3 2023 | Change (YOY) |
|---|---|---|---|---|
| EPS (EPS) | $0.81 | $0.76 | $0.90 | (10%) |
| Revenue | $25.3 billion | $25.25 billion | $25.2 billion | 0.4% |
| Net interest income | $14.0 billion | N/A | $14.5 billion | (3%) |
| Net income | $6.9 billion | N/A | $7.8 billion | (11.5%) |
Source: Bank of America. Note: Revenue is net of interest expense. Analyst estimates for the quarter are provided by FactSet. YOY = Year over year.
Understanding Bank of America
As one of the largest financial institutions in the world, Bank of America delivers a comprehensive range of banking, investing, asset management, and other financial and risk management products and services. It serves clients globally, ranging from individual consumers and small and mid-sized businesses to large corporations and governments.
The bank's substantial investment in technology and innovation has played a pivotal role in strengthening digital capabilities to enhance customer experience and operational efficiency. In recent years, Bank of America's strategic initiatives have concentrated on expanding its wealth management services and improving digital engagement, which has become a key growth driver in its Consumer Banking segment.
Quarterly Highlights
Bank of America saw varied results in Q3 across its segments. Consumer Banking segment revenue declined by 1% year over year to $10.4 billion due to reduced net interest income, partially compensated by an increase in card income. Meanwhile, Global Wealth and Investment Management showcased an 8.3% rise in revenue, reaching $5.76 billion, backed by increased asset management fees. The company set a record for client balances at $4.2 trillion, reflecting strong market conditions and solid net client flows.
Global Banking had a challenging quarter with a 6% dip in revenue to $5.83 billion but managed to secure an 18% lift in investment banking fees to $1.4 billion. Similarly, Global Markets delivered a robust 14% growth in revenue to $5.63 billion, driven by a significant upswing in sales and trading revenues.
Despite the decline in net interest income, management remains upbeat about prospects for stabilization. The provision for credit losses increased to $1.5 billion, influenced by an uptick in net charge-offs, particularly in consumer and commercial real estate. On the capital management front, the Common Equity Tier 1 ratio was slightly above regulatory requirements at 11.8%, allowing the bank to return $5.6 billion to shareholders through dividends and share repurchases.
Looking Ahead
Bank of America's management projects an upturn in net interest income starting in the latter half of 2024. This forecast aligns with a holistic recovery plan incorporating technological investments amounting to $4 billion intended to enhance digital services and operational efficiency through AI-driven solutions. The bank aims to balance responsible growth, focusing on maintaining a solid capital base, driving organic growth, and making strategic investments.
In the coming quarters, investors should remain alert to regulatory shifts, particularly those affecting capital requirements and lending practices.
