Bank Of America (BAC) Quarterly Earnings Report: Bond Market Strong, Equities Down

Bank of America once again outdid analysts’ expectations Monday while announcing its quarterly earnings for the three-month period ending in September. Its third quarter earnings per share (EPS) hit $0.41 on revenue of $20.96 billion, up from $0.38 for the same period last year and $0.36 the previous quarter, and above an expected $0.34.

"Strong client activity and good expense discipline combined to drive positive operating leverage as we continue to optimize and strengthen our balance sheet," Chief Financial Officer Paul M. Donofrio said in the earnings release. "With near-record levels of capital and liquidity, as well as robust underwriting standards, Bank of America is stronger, safer and better prepared to deliver for customers and clients than probably at any time in our history."

The bank’s high performance signaled a mitigation of the uncertainty and volatility that hit global financial markets following the U.K.’s vote to leave the European Union in June, when investors scrambled to reposition their government bond holdings.

In the most recent quarter, Bank of America, like its competitors JPMorgan Chase & Co. and Citigroup Inc., benefitted from recent bond market strength. In its quarterly report, the Charlotte, North Carolina-based bank attributed much of its growth to “stronger performance globally across credit products, led by mortgages.” Its fixed income, currency and commodities trading increased 39 percent, while JPMorgan’s jumped 48 percent and Citi’s rose 35 percent.

Stocks have continued to fluctuate in light of uncertainty surrounding the so-called “Brexit,” the U.S. presidential election and worries of a Deutsche Bank collapse, and Bank of America was not immune to the market’s instability. Its equity trading revenue fell 17 percent.

The bank also reported its highest quarterly profits in ten years, at $4.45 billion, up from $4.42 billion for the quarter ending in June and $4.18 billion for the third quarter last year.

While total net income grew, Bank of America’s most notable spike in net income occurred in the Global Markets arm, with a 34 percent increase to $1.1 billion from $800 million.

The megabank’s revenue increased 3 percent, to $21.6 billion from $21 billion, according to a company press release. It held onto its title as the second largest bank in the U.S. by assets, with nearly $2.2 trillion total as of Sept. 30, second only to JPMorgan, with $2.4 trillion. Meanwhile, its expenses not related to interest payments fell 3 percent from the previous quarter, to $13.48 billion from $13.49 billion.

Despite the positive report, however, Bank of America's stock dropped to $15.90 from $16.20 on Monday morning after rallying at the end of the previous week.