Bank of America profit surges 10% on higher interest income

Goldman Sachs says third-quarter net earnings fell by about 33 per cent to $2.06 billion

Bank of America's revenue rose by 3 per cent on an annual basis to $25.2 billion in the last quarter. AP

Bank of America, the second-largest US bank by assets, has reported an annual 10 per cent jump in its third-quarter net profit on higher net interest income.

The North Carolina-based lender’s net profit surged to $7.8 billion, or $0.90 a diluted share, in the three months to September 30 while revenue rose by 3 per cent on an annual basis to $25.2 billion in the past quarter.

Net interest income surged 4 per cent to $14.4 billion, driven by benefits from higher interest rates and loan growth, the lender said.

The bank’s share price, which has dropped 19.46 per cent since the start of the year, was trading 1.70 per cent higher at $27.45 in pre-market trading on Tuesday.

“Our teammates delivered another strong quarter. We added clients and accounts across all lines of business,” chairman and chief executive Brian Moynihan said.

“We did this in a healthy but slowing economy that saw US consumer spending still ahead of last year but continuing to slow. Our growth in revenue and earnings allowed us to continue our investments in our people and technology to drive an enhanced client experience,” he added.

The consumer banking division added $2.9 billion, or 37.2 per cent, to the bank's total net income. It added about 200,000 new consumer checking accounts in the third quarter, the 19th consecutive quarter of growth. Revenue in this division surged 6 per cent to $10.5 billion.

In the previous quarter, Bank of America’s digital log-ins exceeded three billion, up 10 per cent.

The bank’s digital sales represented 46 per cent of total sales while overall consumer investment assets increased by 28 per cent to $387 billion, the lender said.

The net income of its global banking and markets divisions increased to $2.6 billion and $1.2 billion, respectively.

“We remained disciplined and decreased expenses for the second consecutive quarter while continuing to invest in our franchise,” the bank’s chief financial officer Alastair Borthwick said.

“Our organic earnings generation allowed us to build our capital ratio to 11.9 per cent, leaving us well above our 9.5 per cent October 1’s minimum requirement.”

The bank also returned more than $2.9 billion to shareholders in dividends and share repurchases from July to September.

The lender’s net income in global wealth and investment management arm surged to $1 billion. Client balances increased 9 per cent in the last quarter to $3.6 trillion, driven by higher market valuations and positive net client flows.

Separately, Goldman Sachs said its third-quarter net earnings fell by about 33 per cent to $2.06 billion, from the same period a year ago, driven by a surge in operating expenses.

The New York-headquartered bank’s revenue dropped 1.3 per cent $11.82 billion in the September quarter. Diluted earnings per share dropped 34 per cent annually to $5.47 for the third quarter.

Its operating expenses stood at $9.05 billion in the third quarter, 18 per cent higher than the same period last year. The increase in expenses reflected “higher compensation and benefits expenses”, the bank said.

The bank’s share price surged to trade at $314.70 in the pre-market trading.

“We continue to make significant progress executing on our strategic priorities and we are confident that the work we are doing now provides us a much stronger platform for 2024,” David Solomon, chairman and chief executive of the bank, said.

The bank expects a “continued recovery in both capital markets and strategic activity if conditions remain conducive”.

“As the leader in M&A [merger and acquisition] advisory and equity underwriting, a resurgence in activity will undoubtedly be a tailwind for Goldman Sachs,” Mr Solomon said.

Net revenues for the first nine months of the year stood at $34.94 billion and net earnings reached $6.51 billion.

Global banking and markets segment generated a quarterly net revenues of $8.01 billion, driven by strong performances in fixed income, the lender said. The asset and wealth management division added $3.23 billion to the quarterly revenues.

The bank’s platform solutions arm generated a quarterly net revenue of $578 million, 53 per cent higher than the prior year period.

Global core liquid assets averaged $406 billion for the third quarter, compared with an average of $410 billion for the second quarter of 2023, the bank said.

During the quarter, the bank returned $2.44 billion of capital to shareholders, including $1.50 billion of share repurchases and $937 million of stock dividends. The bank also declared a dividend of $2.75 per share to be paid on December 28, to common shareholders of record on November 30.