Bank of America beats profit estimates as interest rates climb
Bank of America Corp (US.BAC) on Monday reported a smaller-than-expected 9% drop in quarterly profit, as its interest income was bolstered by rising interest rates that offset a slump in investment banking. The U.S. Federal Reserve's aggressive move to tighten monetary policy this year to tame inflation has boosted the amount that banks can earn from charging interest on loans to consumers and businesses.
Shares of BofA, down about 29% so far this year, rose nearly 6% to $33.59 alongside a broader market rally. "BofA benefited from a higher interest rate environment in both the yields on the newly issued loans and just the growth of number of depositors," said Siddharth Singhai, chief investment officer of New York-based investment firm Ironhold Capital.
The second-largest U.S. bank's consumer business reported a 12% jump in revenue, helped by higher balances and a rise in interest rates and a 9% jump in combined credit and debit card spend. The bank, however, added $378 million to its loan-loss reserves as it braces for a weakening economy. That compares with a reserve release of $1.1 billion a year earlier.