Bank of America (NYSE:BAC)
After reporting financial data for the third quarter of the year, shares of Bank of America (NYSE:BAC) were trading nearly 6% higher at 10:23 a.m. ET today.
What’s the Reason?
Earnings per share of $0.81 and revenue of $24.5 billion posted by Bank of America stock were higher than analysts expected.
Net interest income (NII), the profit banks generate on loans and bonds after recouping the cost to finance such assets, was a significant factor in the quarter’s results. The increase in NII from the previous quarter to this one was $1.4 billion, with the increase attributable to the higher returns on many banks’ loans and bond holdings due to the rising interest rate environment. That crushed management’s earlier forecast that NII would increase by up to $1 billion beginning in the second quarter.
A total of $900 million was set aside by the bank as a provision for credit losses; this included a reserve build of $400 million and net charge-offs of around $500 million, which are debts that are very unlikely to be recouped and are a strong predictor of actual loan losses. Still, third-quarter charge-offs were lower than second-quarter levels.
Investment banking remained stagnant, with Bank of America stock producing around $1.17 billion in investment banking fees, down about 46% year over year. Despite the uncertainty, sales and trading revenue remained strong, especially in fixed income.
What’s Next?
Like many of its rivals, Bank of America (NYSE:BAC) had a successful third quarter. Currently, credit quality is stable, investment banking is still having trouble, and net income (NII) is pretty healthy.
Despite my lack of familiarity with the call, I anticipate that management’s NII projection for the full year will rise in light of the ongoing higher-rate environment. I still think investing in Bank of America stock is a good time.
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Bank of America stock rose when the company announced its quarterly profits.
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Author Shariq Khan 
