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Author: Anatol Antonovici
Senior Reporter
Anatol Antonovici

Bank of America’s Consumer Banking Drives Q2 Profit Gain

Bank of America (BoA), the second-largest bank in the US, published its second-quarter financial performance on Wednesday. The bank showed better-than-expected profits, driven by gains in retail banking.

Bank of America’s Profit Rose 8%

The bank reported that its profit reached $7.3 billion in the second quarter, up 8% compared to the same period in 2018. This means a net profit of $0.74 per share against $0.71 forecast by analysts polled by Refinitiv. The revenue was in line with analysts’ predictions at $23.2 billion, up 2.1% from the previous year.

The stock price gained 0.69% at the close on the New York Stock Exchange (NYSE).

Thanks to the second-quarter results, the bank achieved a record profit in the first half of the year, driven by retail banking and the expense initiatives launched by CEO Brian Moynihan. He said:

Our commitment to responsible growth resulted in the best quarter and first-half year of earnings in our company’s history. We see solid consumer activity across the board, with spending by Bank of America consumers up five percent this quarter over the second quarter of last year.

However, the stock encountered problems in April when CFO Paul Donofrio told investors that net interest income (NII) would see its growth at only half the 6% generated last year. Moreover, if the Federal Reserve cuts its interest rate at the next meeting this month, the growth in NII might slow further. Donofrio explained:

From here, if we were to assume stable rates, we think our NII for 2019 would now be up approximately 2% compared to 2018. If rates follow the forward curve, and the Fed funds rate were indeed to be cut twice this year starting this month, we think it would likely shave another 1 percent off NII growth for 2019.

Consumer Banking is The Best Performer

BoA’s consumer banking, which is the biggest division at the bank, saw its profits gaining 13% over the quarter, to $3.29 billion. Revenue surged 5% to $9.72 billion as the unit added deposits and loans, which resulted in higher NII. This helped the division demonstrate the best quarterly figures among BoA’s four main businesses, along with Global Wealth & Investment Management, Global Banking, and Global Markets.

The wealth management business came second with a profit gain of 11% over the second quarter, to $1.07 billion.

The Global Markets division showed negative profits, as the indicator fell 7% to $1.07 billion. The performance was affected by declining trading activity across most of the asset classes. The equities business tumbled 13% to $1.15 billion, which is below the expected $1.22 billion. Revenue in fixed income trading declined 8% to $2.13 billion, in line with the estimates.

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Anatol Antonovici
Anatol Antonovici
Senior Reporter

Anatol has been writing for our news site for a year and is the newest member of our team. While he’s new to us, he’s certainly not new to trading with over 10 years’ experience being a professional financial journalist and working in the markets. Learn more.

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