Retail banking drives Bank of America forward

Lower tax rate sees profits jump 33% to $7.2bn in third quarter

 Pedestrians pass a Bank of America branch in Times Square in New York. Third quarter revenues at the bank came in just ahead of analysts’ estimates. Photographer: Jeremy Bales/Bloomberg

Pedestrians pass a Bank of America branch in Times Square in New York. Third quarter revenues at the bank came in just ahead of analysts’ estimates. Photographer: Jeremy Bales/Bloomberg

 

Robert Armstrong

Third quarter revenues at Bank of America came in just ahead of analysts’ estimates, growing 4 per cent to $22.8 billion, thanks to a good performance from retail banking.

Consumer loans grew 6 per cent, bucking an industry trend of sluggish asset growth.

Chief executive Brian Moynihan said: “Responsible growth, backed by a solid US economy and a healthy US consumer, combined to deliver the highest quarterly pre-tax earnings in our company’s history.”

Net income rose by 33 per cent to $7.2 billion, or 66 US cents a share, against estimates of $6.3 billion and 62 cents, respectively.

A lower tax rate contributed significantly to the income growth. The bank’s tax rate was 20 per cent, compared to 29 per cent in last year’s third quarter.

The bank’s overall loan portfolio did not show the same strength as its consumer book. At $931 billion, it rose only 1.4 per cent, from the prior year, following similarly soft growth at Wells Fargo and Citigroup last week.

Banks’ cost of deposit funding has been a source of concern for bank investors as rates have risen. Bank of America’s rose to 0.55 per cent in the third quarter, up from 0.3 per cent the year before. The net interest margin fell very slightly from the same quarter last year. – Copyright The Financial Times Limited 2018