Bank of America benefited less than expected from rising interest rates even as higher revenues from its retail banking business offset a slowdown in capital markets.
The county’s second biggest bank by assets on Tuesday disclosed net income of $5.27bn for the second quarter, a tenth more than a year ago. Revenues rose 7 per cent to $22.8bn.
The bank did get a boost from the Federal Reserve’s tightening of monetary policy, which is allowing lenders to charge borrowers higher interest rates while keeping offers for depositors on hold. The net interest yield – a measure of lending profitability – rose from 2.23 per cent a year ago to 2.34 per cent.
However, the margin ticked down from 2.39 per cent in the first quarter. Analysts had expected it to be unchanged. Shares in BoA dipped 1.3 per cent in pre-market trading.
It was the latest disappointment from bank earning season. On Friday, BofA’s biggest rival JPMorgan Chase cautioned that its net interest income for this year would be at least $500m less than it had expected.
BofA is seen as being especially well placed to benefit from higher interest rates, in part because of the scale of its domestic retail business.
That has fueled a 42 per cent rally in the bank’s shares since Donald Trump’s election last November. The stock is the best performing among the big six US banks over the period and for the first time since 2008 it trades at the same level as the bank’s book value.
Like rivals JPMorgan and Citigroup, however, Bank of America’s capital market business has suffered from a recent quiet in the markets that has led to a dearth of trading among clients.
BofA’s sales and trading revenue declined 9 per cent to $3.4bn, including a 14 per cent drop in fixed income, currencies and commodities.
Brian Moynihan , chairman and chief executive, said in a statement that “against modest economic growth of 2 per cent” the bank “had one of the strongest quarters in our history”.
Warren Buffett’s Berkshire Hathaway is poised to become BofA’s largest shareholder under a deal with the lender’s board six years ago.
The deal granted Berkshire preferred stock but Mr Buffett said last month he would swap it for BofA’s common shares as their dividend has become more attractive. The Federal Reserve last month gave Bank of America the green light to return capital equating to $16.6bn over the next 12 months, more than double the year before, according to RBC Capital Markets.