Bank of America’s earnings beat estimates due to higher interest income and investment banking gains

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Written by Manya Saini and Nupur Anand

(Reuters) – Bank of America beat Wall Street estimates for quarterly profit on Tuesday as it joined rivals in making more interest payments, while benefiting from better-than-expected performance by its investment and commercial banking divisions.

The US economy has shown resilience despite rising interest rates as a hot job market and healthy financing push consumers to spend on goods, travel and other activities, keeping most companies including banks in strong shape.

“We have added clients and accounts across all areas of the business,” CEO Brian Moynihan said in a statement. “We did this in a healthy but slowing economy, where U.S. consumer spending remains ahead of last year but continues to slow.”

Bank of America’s consumer banking unit revenue rose 6% to $10.5 billion. Bank of America reported that spending on debit and credit cards was also resilient, rising 3% in the quarter.

The bank reported a profit of 90 cents per share in the quarter, beating analysts’ average forecast of 82 cents per share, according to IBES data from LSEG.

Net income of the second-largest US bank rose 10% in the third quarter to $7.8 billion.

The bank’s shares rose 1% in premarket trading.

Bank of America’s investment and commercial banking units managed to beat Wall Street expectations as they reported higher revenues, weathering an industry-wide slump.

Total investment banking fees rose 2% to $1.2 billion, while sales and trading revenue rose 8% to $4.4 billion in the third quarter.

Lenders have seen their interest income swell as they have more room to charge higher rates on loans after the Federal Reserve raised borrowing costs in its battle against inflation.

Bank of America’s net interest income rose 4% in the third quarter to $14.4 billion.

Lending giants JPMorgan Chase, Citigroup and Wells Fargo also reported a rise in the National Insurance Index on Friday and raised their forecasts for the key measure.

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The March crisis also highlighted banks’ holdings of securities, with paper losses accumulating in bond portfolios.

Bank of America said it had $131.6 billion in unrealized losses on held-to-maturity securities in the third quarter, up from about $106 billion in securities losses in the second quarter.

Analysts say the lender is unlikely to be forced to sell the securities at a loss. However, the low-yielding assets also restricted Bank of America’s ability to use deposits elsewhere to generate greater profits.

Bank of America’s revenue, net of interest expenses, rose 3% in the quarter to $25.2 billion.

(Reporting by Manya Saini in Bengaluru and Nupur Ananad and Saeed Azhar in New York; Editing by Lanan Nguyen and Anil D’Silva)