Bank of America’s lending business gets jolt off higher rates

By BLOOMBERG

NEW YORK • Bank of America Corp got another boost from rising interest rates in the third quarter.

The firm’s lending business produced the most interest income since 2011 and its net interest margin climbed to 2.42%, better than analysts estimated. That helped propel profit to a record.

The results follow similar good news from Bank of America’s biggest competitors last Friday, when JPMorgan Chase & Co, Wells Fargo & Co and Citigroup Inc said their consumer-lending businesses were thriving. The US Federal Reserve (Fed) has raised its benchmark interest rate seven times in the last two years, giving banks room to boost what they charge on loans more quickly than what they pay their depositors.

“Responsible growth, backed by a solid US economy and a healthy US consumer, combined to deliver the highest quarterly pretax earnings in our company’s history,” Bank of America CEO Brian Moynihan (picture) said yesterday in a statement announcing the results.

Net income jumped 32% to US$7.2 billion (RM29.95 billion), or 66 cents a share. Analysts had predicted 62 cents, according to the average of 24 estimates compiled by Bloomberg. Net interest income rose to US$11.9 billion.

Shares of the company, which dropped 3.6% this year through last Friday, were little changed in early trading in New York.

The firm’s investment-banking unit posted an 18% revenue decline for the 3Q as the firm got more selective in taking on potentially troublesome deals.

That compares to a mixed picture for rivals that reported results last Friday.

The change in risk appetite came after the firm lost roughly US$300 million related to South African furniture retailer Steinhoff International Holdings NV. The strategy shift has spurred departures, including the firm’s head of corporate and inves tment- banking division, Christian Meissner.

Bank of America’s trading revenue fell 2.5% as the fixed-income unit posted a bigger drop than analysts expected. JPMorgan said last Friday that its equity-trading revenue jumped 17%, helping to offset a 10% tumble on the fixed-income side.