Bank of America’s third-quarter profit fell about 12% from a year earlier, as the bank was unable to offset the huge fees it collected from persistently high deposit costs.
The Charlotte-based megabank continued to provide large sums of money to depositors, with net interest income falling to nearly $14 billion in the third quarter. This was down about $400 million from the same period last year, but up about $300 million from the second quarter of this year.
The bank reported in a press release on Tuesday that it has seen improvement compared to the previous quarter and was able to accumulate larger deposits over the past year.
“We reported strong earnings, with average loan size growth and average deposit growth for the fifth consecutive quarter,” said CEO Brian Moynihan.
Bank of America’s net income was $6.9 billion, or 81 cents per share, down from $7.8 billion, or 90 cents per share, in the year-ago period. Earnings beat analysts’ expectations of 76 cents a share, according to S&P Capital IQ data.
Revenue increased to $25.3 billion, the bank said, reflecting “increased asset management and investment banking fees, lower sales and trading income, and lower net interest income.”
Average deposits in the quarter rose to $1.92 trillion from $1.88 trillion a year earlier. The bank also reported average loan size in the third quarter of about $1.06 trillion, up from $1.05 billion in the same period last year as more private customers sought loans from the bank.
The company’s Wall Street business helped boost earnings as investment banking and asset management fees rose by double digits from a year earlier. Sales and trading revenues also increased by a similar amount.
Non-interest income increased approximately 5.5% from the same period last year to $11.4 billion.
Non-interest expenses rose 4% year over year to $16.5 billion, which the bank attributed to “revenue-related expenses and franchise investments.”
The company recently announced plans to open an additional 165 branches by 2026, with a focus on the US market, where it has a small presence. The company plans to open 40 branches this year, including one that opened last month in Louisville, Kentucky.
Megabanks have spent the past decade cutting back on store space, but the targeted investments signal a turnaround. JPMorgan Chase and Wells Fargo are also opening new branches in some markets.
The bank also set aside more funds to cover potential loan losses, with reserves of about $1.5 billion compared to $1.2 billion a year ago. Amortization was approximately $1.5 billion, up from $931 million in the same period last year. Part of this increase was driven by consumer credit card losses and commercial real estate loans.
However, chief financial officer Alastair Borthwick said on Tuesday that losses in both categories had fallen compared to the second quarter.
“Asset quality was strong,” Borthwick said in a news release. “We believe that our diverse business is a source of strength and helps us deepen existing customer relationships and develop new ones over time.”
