Bank of America beats analysts' profit estimates on retail banking strength

Bank of America posted profit that exceeded analysts’ expectations on strength in its sprawling retail bank. 

The lender said Wednesday that it generated $7.3 billion in second-quarter profit, an 8% increase from a year earlier, or 74 cents a share, compared with the 71 cent estimate of analysts surveyed by Refinitiv. It posted revenue of $23.2 billion, a 2.1% increase from a year earlier, matching analysts’ estimate. 

Under CEO Brian Moynihan, the bank managed to deliver record first-half profit, fueled by the company’s retail lending operations and Moynihan’s cost-cutting initiatives. It was the 18th straight quarter Moynihan and his executives have managed to cut expenses while increasing or holding the line on revenue.

Still, the stock took a hit in April when Chief Financial Officer Paul Donofrio warned investors that growth of net interest income this year would be half the 6% the bank generated in 2018. Now, after the Federal Reserve recently signaled that it’s likely to cut its benchmark short-term interest rate later this month, the question is, does that further slow the growth in this main profit engine for banks?

There were some early signs of this. The bank’s net interest margin, a key metric of bank profitability, declined 7 basis points from the first quarter to 2.44%, which is below the 2.47% estimate analysts had for the second quarter. The bank’s shares dipped 0.4% at 7:09 am in premarket trading. 

Bank of America shares have climbed 18% so far this year, but are lower than when the bank made its revenue warning in April.

Earlier this week, Citigroup, J.P. Morgan Chase, Wells Fargo, and Goldman Sachs all beat analysts’ profit expectations as the firms benefited from one-time gains including a gain on the IPO of electronic market maker Tradeweb.

Here’s what Wall Street expected:

• Earnings: 71 cents a share, a 12.3% increase from a year earlier, according to Refinitiv.
• Revenue: $23.2 billion, a 2.1% increase from a year earlier.
• Net interest margin: 2.47% according to FactSet
• Trading Revenue: Fixed income $2.1 billion, Equities $1.22 billion

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