Bank of America Quarterly Profit Rises 58% on Higher Interest Income

Bank of America Corp.

BAC 3.31%

said Thursday that third-quarter profit rose 58%, suggesting banks’ lending businesses are starting to improve from a pandemic slump.

The bank released $1.1 billion of the reserves it had set aside for pandemic loan defaults, helping boost its profit. Revenue was up 12% from the year-ago period.

Bank profits soared in the latest quarter in large part because the U.S. economy bounced back so quickly from the pandemic recession. Banks last year set aside billions of dollars to prepare for a wave of loan defaults, but now they are releasing the money they had socked away. That helped power double-digit earnings gains at

JPMorgan Chase

& Co.,

Citigroup Inc.


Wells Fargo

& Co. Equities trading and a deal-making boom also pushed up earnings.

Much of the country’s economic activity flows through Bank of America and its peers, offering a real-time view of how consumers and businesses are recovering from the pandemic. Despite an improving economy, banks have had difficulty growing their loan books this year. Total loans outstanding were down from a year ago at Bank of America and Wells Fargo, and flat at Citigroup.

Still, bank executives said they see signs that consumers and businesses have an increasing appetite for debt. Bank of America said its consumer and small-business customers were spending at well ahead of pre-pandemic levels.

The bank’s outstanding loans and leases totaled $927.74 billion at the end of the third quarter, up slightly from the second quarter but down 3% from a year earlier. If not for the runoff in government Paycheck Protection Program loans, the bank’s loan book would have grown almost 2% from the second quarter.

Commercial lending inside the U.S. and abroad ticked up from a year ago. Additionally, more people borrowed against their stock portfolios. Securities-based loans to wealth-management clients jumped by about one-quarter over the past year.

The bank benefited from a rebound in net interest income, which includes the money it makes on loans and holdings of debt instruments such as mortgage-backed securities. Net interest income rose 10% from a year earlier to $11.1 billion.

“We’re anticipating more loan growth across all of our products,”

Paul Donofrio,

the bank’s exiting chief financial officer, said on a call with reporters Thursday.

Bank of America’s noninterest income, which includes fees, rose 14% from a year earlier to $11.67 billion.

A boom in mergers and acquisitions helped lift investment-banking fees across the industry. Advisory fees more than tripled at

Morgan Stanley

and Citigroup, and more than doubled at JPMorgan. They rose 65% at Bank of America.

The bank’s investment bank has often trailed peers, but Mr. Donofrio said that the pipeline of deals remained robust going into the fourth quarter.

Equities-trading revenue rose almost across the board at the banks, but fixed-income trading slowed. JPMorgan and Citigroup both reported a 5% drop in overall trading revenue; Morgan Stanley reported a 6% increase.

At Bank of America, total adjusted trading revenue was $3.63 billion, up 9% from a year earlier.

Overall, the second-largest U.S. bank earned $7.69 billion, up from $4.88 billion in the same period a year earlier. Per-share earnings of 85 cents topped the 71 cents that analysts polled by FactSet had expected.

Revenue totaled $22.77 billion, up 12% from $20.34 billion a year ago. That beat analysts’ expectations for revenue of $21.68 billion.

Analysts and investors also have been keeping a close eye on expenses, which rose in recent quarters. Noninterest expenses were roughly flat from a year earlier at $14.44 billion.

Bank of America’s stock price, which is up 42% so far this year, traded nearly 3% higher Thursday afternoon.

Bank earnings

Read more articles about companies closely tied to the economy, selected by WSJ editors.

Write to Ben Eisen at [email protected]

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