Bank of America Q2 Beats Estimates, Net Interest Misses

Bank of America reported fiscal second-quarter earnings of $1.21 per share on $31.6 billion in revenue, above consensus. Equity trading revenue rose about 70% and investment banking fees increased about 50%. Net interest income was $16 billion, short of the $16.2 billion analyst consensus.

The bank said overall revenue increased 15% year over year, driven largely by capital markets activity. Net interest income rose sequentially but missed forecasts, reflecting higher funding and deposit costs during the quarter.

Interest-bearing deposits totaled $1.5 trillion for the quarter, while non-interest-bearing deposits fell to $514.5 billion as clients shifted cash into higher-yielding products such as certificates of deposit and money market funds.

That shift increased the cost of funding for the bank and limited expansion of its net interest margin. The weaker-than-expected net interest income highlights pressure in the lending and deposit business even as trading and advisory fees rose.

Market reaction was positive after the results. Shares traded higher and were more than 30% above their year-to-date low. The stock trades at roughly 13 times forward earnings, and the relative strength index sat just under 70 at the time of reporting.

Banks are operating with a higher-for-longer interest rate backdrop and changing customer deposit behavior. The quarter’s results make future performance more sensitive to capital markets activity and to any recovery in net interest income.

Analysts and investors will watch upcoming quarters for signs that net interest income can recover or that trading and investment banking revenues remain elevated.