BofA Beats Despite 22% Plunge in FICC Revenue, Credit Loss Provision Jumps 15%

Mirroring the pattern set by JPM and Citi yesterday, Bank of America reported revenue and earnings that modestly beat expectations, with Q3 revenue of $21.8BN and $22.1BN on an adjusted, FTE basis, just above the $21.9BN consensus estimate, generating net income of $5.6 billion (up 13% Y/Y), and EPS of $0.48, above the $0.46 estimate, and higher than the $0.41 reported Y/Y, even as sales and trading revenues slumped, and FICC revenue tumbled by 19%.

Net interest income increased 9% for the second consecutive quarter, or $1.0B, to $11.4B. BofA achieved this as its Net Interest Yield (i.e. NIM) rose fractionally from 2.34% in Q2 to 2.36% in Q3, a number just barely higher than the 2.35% expected. As the bank explained,the Net Interest Income increased “reflecting the benefits from higher short-end interest rates, loan growth and one additional interest accrual day, partially offset by higher deposit pricing in GWIM and the full quarter impact from the sale of the non-U.S. consumer credit card business.”

BofA also gave the following interest rate sensitivity as of Sept 30: “+100bps parallel shift in interest rate yield curve is estimated to benefit NII by $3.2B over the next 12 months, driven primarily by sensitivity to short-end interest rates.”

With everyone looking at trends in loan quality, BofA revealed that just like JPM and Citi, its provision for credit losses jumped 15% to $834 million from $726 million in the previous quarter, with net charge-offs of $900 million effectively unchanged from Q2 17. That said, this number was modestly better than the $915 million expected. The bank explained that that “Provision expense of $0.8B increased $0.1B from 2Q17, due primarily to credit card portfolio seasoning and loan growth, partially offset by improvements in consumer real estate and reductions in energy exposures.” In other words, the same …read more


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