July 18 (Reuters) – Bank of America (BofA) posted a drop in second-quarter profit on Monday, hit by a slump in revenue at its investment bank, as business fell to a fraction of record highs last year.
Investment bankers on Wall Street watched last year’s record trading volumes tumble in the first half of 2022, amid market volatility, geopolitical tensions and a sense of loss. risk that swept away global markets.
Profit attributable to Bank of America shareholders fell to $5.93 billion (5.86 billion euros), or 73 cents per share, for the quarter ended June 30, from $8.96 billion , or $1.03 per share, a year earlier.
Amid falling stock prices and slowing mergers and acquisitions, fees from Bank of America’s investment banking business plunged 47% to $1.1 billion in the quarter.
Its revenue, net of interest expense, rose 6% to $22.7 billion over the same period.
The US Federal Reserve quickly raised interest rates to curb record inflation. If the risk of recession persists, this measure translates for the moment into an increase in profits for banks, which usually benefit from high interest rates.
Bank of America’s net interest income, which measures the difference between interest earned on loans and the amount paid out on deposits, jumped 22%, or $2.2 billion, to $12.4 billion. of dollars.
Due to the composition of its balance sheet, the group is more sensitive than the major US banks to changes in interest rates.
“Our U.S. retail customers remained resilient with deposit balances and spending levels still high,” said chief executive Brian Moynihan.
The resilience of US consumers is being tested, however, by inflation, which is at levels not seen in four decades, but spending trends largely hold, bolstering the bank’s earnings.
Spending trends are a key indicator of consumer financial health and are closely tied to the performance of its retail banking business, whose revenue rose 12% to $9.1 billion in the second quarter.
The bank’s cumulative spending on credit and debit cards jumped to $220.5 billion, up 11% from the previous quarter and 10% year-on-year.
The group recorded average deposits of more than 1,000 billion dollars, an increase of 10% compared to the previous year.
The Fed’s aggressive stance on reducing inflation, however, puts credit forecasts in a bind, as rapidly rising borrowing costs could hurt demand.
Bank of America, the second-largest U.S. bank by assets, released $48 million in reserves in the quarter, down from $2.2 billion a year earlier, leaving its total loan loss provisions at $500 million .
The bank stands out from rivals JPMorgan Chase & Co and Wells Fargo & Co, which increased their loss provisions by $428 million and $235 million, respectively, in the quarter.
The title Bank of America, which has fallen by nearly 28% since the start of the year, remained stable in the forecourt trade. (Reporting Manya Saini and Niket Nishant in Bangalore, Elizabeth Dilts Marshall in New York; French version Dagmarah Mackos, editing by Kate Entringer)
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