Bank of America’s net profit drops 8% to &7.1 billion in Q3FY23
Bank of America, an American multinational investment bank and financial services holding company, announced its Q3 FY23 results on October 17, 2022. The banking corporation reported a total net profit of $7.1 billion for the quarter that ended September 2022, falling nearly 8% YoY from $7.7 billion recorded in the same quarter last year.
The consolidated revenue from operations of Bank of America(BOA) increases by 7.45% to $24.5 billion during the reported quarter from $22.8 billion in the year-ago period. In Q3FY3 the company’s total expenses crossed $15.3 billion compared to $ 14.3 billion reported in the same quarter last year which logs in YoY growth of 7%. The financial holding company reported a profit before tax of $8.3 billion in Q3 FY22 as compared to $9. billion recorded in the year-ago quarter which results in a decline of 8%. The company’s earnings per share(EPS) falls to $0.81 from $0.85 recorded in Q3FY21.
Q3-22 Financial Highlights
· Net income of $7.1 billion, or $0.81 per diluted share
· Pretax income declined 7% to $8.3 billion reflecting a reserve build compared to a reserve release in Q3-21 – Pretax, pre-provision income increased 10% to $9.2 billion
· Revenue, net of interest expense, increased 8% to $24.5 billion – Net interest income (NII) up $2.7 billion, or 24%, to $13.8 billion, driven by benefits from higher interest rates, including lower premium amortization expense, and solid loan growth – Noninterest income of $10.7 billion decreased $935 million, or 8%, as higher sales and trading revenue was more than offset by lower investment banking and asset management fees as well as lower service charges
· Provision for credit losses of $898 million increased $1.5 billion – Net reserve build of $378 million vs. net reserve release of $1.1 billion in Q3-21 – Net charge-offs of $520 million increased 12%
· Noninterest expense increased $863 million, or 6%, to $15.3 billion and included $354 million related to the settlement of legacy mono-line insurance litigation
· Average loan and lease balances up $114 billion, or 12%, to $1.0 trillion led by strong commercial loan growth as well as higher credit card balances
· Average deposits up $20 billion, or 1%, to $2.0 trillion
· Average Global Liquidity Sources of $941 billion(F)
· Common equity tier 1 (CET1) ratio of 11.0% (Standardized) increased by 49 basis points from Q2-22; paid $1.8 billion in common dividends and repurchased $450 million of common stock
· Return on average common shareholders’ equity ratio of 10.8%; return on average tangible common shareholders’ equity ratio of 15.2%
Q3-22 Business Segment Highlights
Consumer Banking
· Net income of $3.1 billion
· Client balances of $1.6 trillion, up 1%
· Average deposits of more than $1 trillion, up $68 billion, or 7%
· Combined credit/debit card spend of $218 billion, up 9%
· Client Activity
– Added more than 417,000 net new Consumer checking accounts in Q3FY22; 15th consecutive quarter of growth and highest quarter since Q3FY08
– Record 35.6 million Consumer checking accounts with 92% being primary
– 3.7 million Small Business checking accounts, up by 5%
– Digital sales grew 36%
Global Wealth and Investment Management
· Net income of $1.2 billion
· Client balances of $3.2 trillion, down 12%, driven by lower market valuations, partially offset by net client flows
· Pretax margin of 29%
Client Activity
– $1.3 trillion AUM balances; $42 billion worth of AUM flows since Q3FY21
– $224 billion of average loan and lease balances, up by $24 billion, or 12%; 50th consecutive quarter of average loan and lease balance growth
– Added more than 5,700 net new relationships across Merrill and Private Bank
Global Banking
• Net income of $2.0 billion
• Total investment banking fees (excl. self-led) of $1.2 billion, a decrease of 46%, reflecting weaker industry-wide underwriting activity this year
• No. 3 in investment banking fees
• Client Activity
– $384 billion of average loan and lease balances, up by $60 billion, or 18%
– $2.8 billion of global Transaction Services revenue, up by $858 million, or 44%
Global Markets
•Net income of $1.1 billion
• Sales and trading revenue up 13% to $4.1 billion, including net debit valuation adjustment (DVA) losses of $14 million; Fixed Income Currencies and Commodities (FICC) revenue of $2.6 billion and Equities revenue of $1.5 billion
• Excluding net DVA(H) , sales and trading revenue up 13% to $4.1 billion; FICC up 27% to $2.6 billion; Equities down 4% to $1.5 billion
• Zero days of trading losses in Q3-22
Brian Moynihan, CEO, “We continued to see strong organic client growth across our businesses, with increased client activity helping to drive revenue up by 8%. Our U.S. 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. Our team adapted well to our new capital requirements and improved our CET1 ratio by 49 basis points to 11%, above our new regulatory minimums. I am proud of our teammates’ efforts to deliver for our clients and shareholders.”
Alastair Borthwick, CFO, “We delivered a solid quarter for shareholders as we continued to execute on our responsible growth strategy. We grew revenue, delivered operating leverage for the 5th consecutive quarter, continued our steady investments in the franchise, and managed risk well. This helped us to deliver strong pretax, pre-provision income growth year over year”.
On Friday the shares of Bank of America closed at $34.90 apiece, up by 3.8% from the previous close of $33.52. On a YTD basis, the stock has fallen 26.47% so far in 2022.
