Bank of America beats earnings estimates for ‘resilient’ consumers

Bank of America reported better-than-expected third-quarter earnings as rising profit margins from consumer lending helped offset declining investment banking revenues.

“Our U.S. consumer customers remained resilient with strong, albeit slower-growing, spending levels and still maintained high deposit levels,” Chief Executive Brian Moynihan said in a statement accompanying the lender’s results on Monday.

Spending on debit and credit cards at the second largest US bank increased 9 percent, or $18 billion, compared to the same period last year. A $68 billion increase in consumer deposits helped offset declining corporate customer balances, which fell 7 percent.

Like its Wall Street peers, Bank of America has benefited from the Federal Reserve’s campaign to cool the economy by raising interest rates, allowing lenders to charge more of borrowers.

Net interest income, or the difference between a bank’s income on its loan book and payments on deposits, rose 24 percent to $13.8 billion, driven by higher interest rates and a 12 percent increase in lending.

Bank of America reported a net interest margin of 2.06 percent, up from 1.68 percent a year earlier.

But concerns about a possible recession – compounded by rising interest rates – have contributed to falling revenues elsewhere in the bank. Investment banking fees fell 46 percent to $1.2 billion as economic uncertainty put deals on hold.

Earnings were also impacted by a $378 million reserve created for potential bad loans.

Overall, the Charlotte, NC-based bank reported quarterly earnings of $7.1 billion, or 81 cents a share, compared to $7.7 billion, or 85 cents a share, a year earlier. Total revenue increased 8 percent to $23.5 billion.

According to a FactSet poll, Wall Street analysts had forecast earnings of 78 cents a share on sales of $23.5 billion.

Shares were up 2.9 percent in premarket trading at $32.56.