Bank of America’s trading arm helps profits beat expectations

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Bank of America on Tuesday reported better than expected second-quarter profits, buoyed by its trading arm and the benefits of higher interest rates.

The nation’s second-largest bank profits increased 19 per cent in the second quarter from a year ago to $7.4bn, ahead of analyst expectations of $6.9bn.

BofA was boosted by its markets business with revenue from bond, commodities and currency trading up 18 per cent in the quarter, as clients turned to the bank to help manage interest rate increases.

Adjusted revenue from sales and trading, including equities, climbed 10 per cent from a year ago. Rivals reported double-digit falls in revenue from their markets business for the second quarter.

BofA’s net interest income (NII), which is the difference between what banks pay depositors and what they can earn from loans and investments, rose 14 per cent from the same period a year ago to $14bn.

“We continue to see a healthy US economy that is growing at a slower pace, with a resilient job market,” said BofA’s chief executive Brian Moynihan in a statement.

It was the bank’s sixth straight quarter of double-digit NII growth, just less than less than rivals. JPMorgan Chase, which reported its earnings on Friday, had a 44 per cent increase in interest income in the quarter.

BofA continues to suffer from a decision made three years ago to pump $625bn in pandemic-era deposit inflows into the debt markets at a time when bonds traded at historically high prices and low yields. That portfolio is one of the reasons the bank’s interest income disappointed. Unrealised losses in the bond portfolio rose to $110bn, from $103bn three months ago.

Shares of BofA rose slightly in pre-market trading after the earnings news to nearly $30 each.