Bank of America tops estimates on better-than-expected trading revenue

Bank of America topped analyst estimates for third-quarter profit and revenue on better-than-expected trading results.

Here’s what the company reported:

• Earnings: 81 cents vs. 77 cents LSEG estimate
• Revenue: $25.49 billion vs. $25.3 billion estimate

The bank said Tuesday that net income fell 12% from a year earlier to $6.9 billion, or 81 cents a share, on higher provisions for loan losses and rising expenses.

Revenue rose less than 1% to $25.49 billion as gains in trading revenue, asset management and investment banking fees offset a decline in net interest income.

Shares of the bank climbed 2.5% in premarket trading.

Bank of America, run by CEO Brian Moynihan since 2010, demonstrated the advantages of having a massive and diversified financial institution. Analysts have focused on the bank’s core activity of taking in deposits and lending to consumers and corporations as rising rates have squeezed the firm’s haul from interest income.

But the quarter showed that the bank also benefits from surging activity on Wall Street through its trading and advisory operations, just as rivals JPMorgan Chase and Goldman Sachs did.

Fixed income trading revenue rose 8% to $2.9 billion, topping the $2.74 billion StreetAccount estimate, on strength in currencies and interest rate activity. Equities trading jumped 18% to $2 billion, topping the $1.81 billion StreetAccount estimate, on higher cash and derivative volumes.

Investment banking fees also jumped 18% to $1.40 billion, topping the $1.27 billion estimate from StreetAccount.

While net interest income fell 2.9% from a year earlier to $14.1 billion, that edged out the $14.06 billion StreetAccount estimate.

That NII figure in the third quarter was higher than in the second quarter, a sign that the trajectory for this key metric is improving. The lender said in July that a rebound in net interest income was coming in the second half of the year.

Bank of America “seems to be turning the corner on NII inflection,” though the degree is dependent on interest rates from here on out, Wells Fargo analyst Mike Mayo said Tuesday in a note.

NII, which is one of the key ways that banks make money, is the difference between what a bank earns on loans and investments and what it pays depositors for their savings.

The bank’s provision for credit losses in the quarter of $1.5 billion was slightly under the $1.57 billion estimate.

JPMorgan Chase and Wells Fargo on Friday posted earnings that topped estimates, helped by their investment banking operations. Goldman Sachs and Citigroup are also reporting results Tuesday, while Morgan Stanley will disclose earnings Wednesday.

This story is developing. Please check back for updates.