Bank of America tops estimates on reserve release, strong advisory and asset management results

FAN Editor

Bank of America posted third-quarter results that exceeded analysts’ expectations as it benefited from better-than-expected loan losses and record advisory and asset management fees.

Here are the numbers:

  • Earnings: 85 cents a share vs the 71 cents a share estimate of analysts surveyed by Refinitiv
  • Revenue: $22.87 billion vs the $21.8 billion estimate

Profit surged 58% to $7.7 billion, or 85 cents a share, as revenue climbed 12% to $22.87 billion. Results were helped by a $1.1 billion reserve release that led to a $624 million boost after chargeoffs.

Shares of the bank climbed 2.8% in premarket trading.

“We reported strong results as the economy continued to improve and our businesses regained the organic customer growth momentum we saw before the pandemic,” CEO Brian Moynihan said in the release. “Deposit growth was strong and loan balances increased for the second consecutive quarter, leading to an improvement in net interest income even as interest rates remained low.”

Net interest income, a closely watched figure for banks, jumped 10% to $11.1 billion, exceeding the $10.6 billion StreetAccount estimate.

Investors had wanted to see loan growth improve from a weak first half of the year because that helps banks produce more interest income. Indeed, loan balances increased 9% on an annualized basis from the second quarter, driven by strength in commercial loans, the bank said.

Like rival JPMorgan Chase, Bank of America posted strong results in investment banking, wealth management and equities trading businesses.

Investment banking fees rose 23% to $2.2 billion, helped by a 65% surge in advisory fees to a record $654 million.

The bank’s wealth management division posted a 17% increase in revenue to $5.3 billion, driven by record asset management fees of $3.2 billion.

Like other lenders, Bank of America set aside billions of dollars for credit losses last year, when the industry anticipated a wave of defaults tied to the coronavirus pandemic. Banks have been releasing some of those funds when the losses didn’t arrive, and analysts will be curious how much of a boost that dynamic will have in the second half of the year.

They will also likely ask CEO Brian Moynihan about succession planning after his most senior deputy, chief operating officer Tom Montag, announced his departure. Last month, Moynihan announced a sweeping management overhaul, including a new finance chief, technology head, general counsel and chief administrative officer.

Shares of Bank of America have climbed 42% this year before Thursday, exceeding the 36% gain of the KBW Bank Index.

On Wednesday, bigger rival JPMorgan posted results that beat expectations, driven by a $1.5 billion boost from better-than-expected loan losses. On Thursday, Morgan Stanley topped expectations as the firm posted record results in investment banking and asset management.

This story is developing. Please check back for updates.

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