By
Godfrey Benjamin
April 17th, 2024
Both the Bank of America (BoA) & BNY Mellon beat analysts’ expectations in Q3 2022, see stocks rise 2.9% and 4.4% respectively.
Bank of America (BoA) (NYSE: BAC) and BNY Mellon (NYSE: BK) showed strong outings on their recently-released Q3 2022 financial reports. Their respective third-quarter reports showed that they both beat analysts’ expectations on profit and revenue, mainly due to higher interest rates.
For instance, Bank of America posted better-than-expected fixed-income trading and gains in interest income thanks largely to prevailing macroeconomic fiscal parameters. The Charlotte-based multinational investment bank and financial services holding company reported Q3 revenue of $24.61 billion adjusted. This sum was enough to comfortably surpass the consensus estimate of $23.57 billion for the same period. In addition, Bank of America’s earnings per share came in at 81 cents versus the 77 cents expected. Meanwhile, the banking giant’s revenue net of interest expense climbed to $24.61 billion on a non-GAAP basis. However, BoA also revealed that its Q3 profit fell 8% to $7.1 billion, or 81 cents a share. This was because the company booked a $898 million provision for credit losses in the quarter ended September 30th.
BoA’s net interest income jumped 24% to $13.87 billion, surpassing analysts’ estimate of $13.6 billion. In addition, the company’s fixed-income trading revenue increased by 27% to $2.6 billion. However, investment banking revenue sank 46% to $1.2 billion, slightly exceeding the $1.13 billion estimate.
Owing to its positive earnings report, the leading bank’s shares rose 2.9% in premarket trading.
Fed Interest Rate Hikes, the Difference Maker
Like several leading banks in the US, BoA has benefitted from interest rate hikes aimed at combatting inflation. As a result, these banks, including Wells Fargo (NYSE: WFC) and JP Morgan (NYSE: JPM), are producing more ‘lending revenue’ as rates go up. This also allows them to reap more profits from their primary activities of accepting deposits and making loans. Speaking to the development, Bank of America chief executive officer Brian Moynihan explained:
“Our US consumer clients remained resilient with strong, although slower growing, spending levels and still maintained elevated deposit amounts. Across the bank, we grew loans by 12% over the last year as we delivered the financial resources to support our clients.”
BNY Mellon Posts Overwhelming Revenue Figures for Q3 2022, Just Like BoA
Besides Bank of America, BNY Mellon also saw its stock increase by 4.4% in premarket based on a rousing Q3 2022 performance. In addition, the New York-based banking giant also saw an increase in revenue after exceeding Wall Street’s expectations. For the third quarter, BNY Mellon raked in revenue of $4.28 billion compared to analysts’ estimates of $4.20 billion. Furthermore, the banking services company also realized a Q3 adjusted EPS of $1.21 compared to the $1.08 consensus estimate.
The benefit of higher interest rates also reflected in BNY’s performance, alongside a favorable combination of other fiscal offerings. According to the company’s president and chief executive officer, Robin Vince:
“Our performance benefited from higher interest rates and continued strength in client volumes and balances across our Securities Services and Market and Wealth Services segments.”
However, Vince also revealed that declining global markets hurt BNY’s Wealth Management and Investment units, especially in Investment Management. Still, the positive net inflow from the bank’s businesses was enough to help it finish the quarter strong, he concluded.