^{Source: Predictions based on analysts’ consensus from Visible Alpha}

Bank of America (BAC) Financial Results: Analysis

Bank of America Corp. (BAC), the second-largest U.S. bank by consolidated assets, beat analyst predictions on profit, revenue, and net interest margin for Q3 FY 2022 on higher interest rates and loan growth, although the results were partly offset by a swelling provision for credit losses of $898 million and declining investment banking fees. Net interest margin also beat predictions.

Earnings per share (EPS) fell 4.7% year-over-year (YOY) to 81 cents, compared with a consensus estimate of 78 cents. Revenue also outperformed, rising by 7.5% YOY in line with rising interest rates, Noninterest income declined.

Bank of America’s outperformance, announced before markets opened on Oct. 17, show how the firm, like other lenders, benefited from a series of interest rate hikes in recent months by the Federal Reserve. Climbing rates bolstered net interest income even as Bank of America’s investment banking business slowed due to weaker underwriting activity.

BAC Net Interest Margin

Bank of America’s net interest margin, which the firm calls “net interest yield,” came in at 2.06%, above expectations for 2.0%. It’s a key metric that measures the difference between income banks generate from credit products such as loans and mortgages compared with interest they pay to depositors and other creditors. It’s analogous to gross margin reported by non-financial companies.

BAC Outlook and Stock Performance

Bank of America didn’t provide forward guidance. Chief Executive Officer Brian Moynihan has said U.S. consumer spending levels and deposit amounts remain strong, even as they showed signs of slowing.

Bank of America shares, down 27% in the past year compared with a 19.3% decline in the S&P 500 Index, jrose 5.2% as of 10:45 a.m. New York time on Oct. 17..

Bank of America’s fourth quarter earnings report is expected to be released on Jan. 13, 2023.