NEW YORK (AP) – Bank of America Corp.’s second quarter profit more than doubled from a year earlier, as the consumer banking giant was able to move more loans onto the “good” side of its balance sheet as the pandemic wanes.
BofA is the latest of the big Wall Street banks to report stronger profits this quarter, largely due to the improving economy and fewer borrowers being delinquent on their loans. But like other banks, BofA saw a decline in interest income and revenues from a year earlier because of lower interest rates.
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The Charlotte-based bank said it earned $9.22 billion in the last three months, or $1.03 per share. That is up from a profit of $3.53 billion, or 37 cents per share, from the same period a year earlier. The results were better than the 77-cent-per-share profit that analysts had forecasted, according to FactSet.
Bank of America’s profits were boosted by two one-time items. The bank was able to release $1.6 billion from its loan-loss reserves that it had set aside during the pandemic to guard against defaults, and also recorded a $2 billion one-time credit related to certain taxable assets in the U.K.
While Bank of America’s profits rose from a year earlier, revenues did not. Interest income fell in the quarter to $10.23 billion from $10.85 billion a year earlier, due to lower interest rates. Bank of America’s balance sheet is more heavily weighted toward securities with short-term durations, which means the bank’s interest income can fluctuate more when interest rates change compared to other banks.
Also a reflection of challenges in interest rates was the net interest margin, the difference between interest income generated and the amount paid out to lenders. The second quarter’s 1.61% net interest margin was 26 basis points below the same time frame a year ago.
Non-interest income of $11.2 billion dipped slightly – down 2.1% over a year ago – driven by lower sales and trading revenue, which was partially offset by increases in consumer and wealth management incomes.
The decline in revenues from trading is similar to what happened at JPMorgan Chase and Goldman Sachs. The second quarter of 2020 was a highly volatile one as traders navigated the impact of the pandemic, which gave Wall Street traders ample opportunities to find investments to profit from in the volatility. Now that things have cooled down, those profits have declined.
The bank’s global markets division, which contains its trading desks, reported a profit of $908 million in the quarter. That’s down from $1.9 billion a year earlier.
Non-interest expenses rose 12% year over year to $15 billion, reflecting increases in employee benefits and compensation, a $500 million contribution to the bank’s charitable foundation and $300 million associated with processing unemployment benefit claims, the bank said.
Total assets stood at $3.0 trillion, a 10.5% year-over-year increase driven by doubling of the company’s debt securities. Loans and leases fell 12% in that time to $907.9 million, with decreases in consumer, commercial and real estate loans.
Total deposits of $1.9 trillion increased 11.1% year over year.
Ken Sweet is an AP business writer. PBN contributed to this report.
