Did Bank of America beat or miss expectations, and what drove earnings?

The filing does not include consensus estimates, so a beat or miss cannot be determined from it. Earnings fell year over year, with net income down 7% to $6.9B and EPS down to $0.83 from $0.88, mainly because net interest income declined 3% as higher deposit costs outweighed higher asset yields. Fee income partly offset that decline, with asset management fees, investment banking fees and sales and trading revenue all higher.

Is the net interest income decline likely to reverse?

Management expects 4Q24 NII of about $14.5B (FTE), up from $13.9B in 2Q24. Drivers include roughly $300M from fixed-rate asset repricing, about $200M from Global Markets NII and about $125M from the BSBY cessation impact, partly offset by roughly ($225M) from the impact of 25 bp of rate cuts in September, November and December 2024. These are forward-looking estimates that depend on the rate path and balance sheet trends.

How strong is the bank's capital position, and what does it mean for shareholders?

The CET1 ratio was 11.9% on a Standardized basis, unchanged from 1Q24 and up from 11.6% a year earlier, and it sits 122 bps above the new regulatory minimum effective October 1, 2024. The bank returned $5.4B in the quarter, and management proposed an 8% dividend increase to $0.26 per share, subject to Board approval. Tangible book value per share grew 9% YoY to $25.37.

Are credit quality trends a concern?

Credit quality showed some pressure but remained manageable. Net charge-offs were $1.5B (0.59% ratio), up from $869M a year earlier, and the credit card loss rate rose to 3.88% from 3.62% in 1Q24. Nonperforming loans declined to $5.5B from $5.9B in 1Q24, mainly from the commercial real estate office portfolio. The allowance for loan and lease losses was 1.26% of loans.

Why did the Consumer Banking segment's revenue and net income decline?

Consumer Banking revenue fell 3% YoY to $10.2B, mainly from lower average deposit balances, which dropped $57B (6%) to $949B. Net income declined to $2.6B from $2.9B. The segment still grew consumer investment assets 23% to a record $476B and added 278,000 net new checking accounts, its 22nd consecutive quarter of growth.

BAC 8-K: Earnings & Results & Regulation FD

01—Abstract

Summary

Summary of the 8-K filed July 16, 2024. Cited figures are marked; the original filing is the authoritative source.

Bank of America (BAC) reported second-quarter 2024 net income of $6.9 billion^a, or $0.83 per diluted share, versus $7.4 billion, or $0.88 per diluted share, in 2Q23.

Revenue net of interest expense was $25.4 billion^b, up about 1% year over year, led by higher asset management and investment banking fees and sales and trading revenue, partly offset by a 3% decline in net interest income to $13.7 billion as deposit costs rose faster than asset yields. Noninterest expense rose 2% to $16.3 billion, and the provision for credit losses increased to $1.5 billion, driven by higher credit card net charge-offs and commercial real estate office losses. Compared with 1Q24, earnings improved on the absence of the $0.7 billion FDIC special assessment accrual recorded in the prior quarter.

Capital and shareholder returns were a focus. The CET1 ratio (Standardized) was 11.9%, flat versus 1Q24 and 122 bps above the regulatory minimum taking effect October 1, 2024. Book value per share rose 7% year over year to $34.39^c, and tangible book value per share rose 9% to $25.37.

The company returned $5.4 billion^d to shareholders through $1.9 billion in common dividends and $3.5 billion in buybacks. Management announced a proposed 8% increase in the quarterly common dividend to $0.26 per share, subject to Board approval. ROTCE was 13.6%, and ROE was 10.0%.

Segment performance was mixed. Consumer Banking earned $2.6 billion despite revenue falling 3% on lower deposit balances, and it added a record 37.2 million checking accounts. Global Wealth & Investment Management earned $1.0 billion on record client balances above $4 trillion.

Global Banking earned $2.1 billion, and Global Markets earned $1.4 billion with sales and trading revenue up 9%. Management guided that 4Q24 net interest income will be about $14.5 billion (FTE), up from $13.9 billion in 2Q24, supported by fixed-rate asset repricing and Global Markets activity, partly offset by the expected impact of 25 bp of rate cuts. These are forward-looking statements.

02—Key points

Key Highlights

Net income of $6.9B ($0.83 diluted EPS) vs. $7.4B ($0.88) in 2Q23; up from $6.7B ($0.76) in 1Q24 when adjusted for the FDIC special assessment, EPS was $0.83 in both quarters
Revenue net of interest expense of $25.4B, up 1% YoY, with noninterest income up 6% to $11.7B; net interest income fell 3% to $13.7B on higher deposit costs
Provision for credit losses rose to $1.5B (net charge-offs of $1.5B, 0.59% ratio), driven by credit cards (3.88% loss rate) and commercial real estate office; net reserve release of $25M
CET1 ratio of 11.9% (Standardized), 122 bps above the regulatory minimum effective Oct. 1, 2024; CET1 capital of $198B
Returned $5.4B to shareholders ($1.9B dividends, $3.5B buybacks); proposed 8% quarterly dividend increase to $0.26, pending Board approval
Book value per share of $34.39 (+7% YoY) and tangible book value per share of $25.37 (+9% YoY); ROTCE of 13.6%
Management guides 4Q24 NII to about $14.5B (FTE) from $13.9B in 2Q24, citing fixed-rate asset repricing and Global Markets activity, partly offset by rate cuts

03—Questions

Frequently Asked Questions

Did Bank of America beat or miss expectations, and what drove earnings?
The filing does not include consensus estimates, so a beat or miss cannot be determined from it. Earnings fell year over year, with net income down 7% to $6.9B and EPS down to $0.83 from $0.88, mainly because net interest income declined 3% as higher deposit costs outweighed higher asset yields. Fee income partly offset that decline, with asset management fees, investment banking fees and sales and trading revenue all higher.
Is the net interest income decline likely to reverse?
Management expects 4Q24 NII of about $14.5B (FTE), up from $13.9B in 2Q24. Drivers include roughly $300M from fixed-rate asset repricing, about $200M from Global Markets NII and about $125M from the BSBY cessation impact, partly offset by roughly ($225M) from the impact of 25 bp of rate cuts in September, November and December 2024. These are forward-looking estimates that depend on the rate path and balance sheet trends.
How strong is the bank's capital position, and what does it mean for shareholders?
The CET1 ratio was 11.9% on a Standardized basis, unchanged from 1Q24 and up from 11.6% a year earlier, and it sits 122 bps above the new regulatory minimum effective October 1, 2024. The bank returned $5.4B in the quarter, and management proposed an 8% dividend increase to $0.26 per share, subject to Board approval. Tangible book value per share grew 9% YoY to $25.37.
Are credit quality trends a concern?
Credit quality showed some pressure but remained manageable. Net charge-offs were $1.5B (0.59% ratio), up from $869M a year earlier, and the credit card loss rate rose to 3.88% from 3.62% in 1Q24. Nonperforming loans declined to $5.5B from $5.9B in 1Q24, mainly from the commercial real estate office portfolio. The allowance for loan and lease losses was 1.26% of loans.
Why did the Consumer Banking segment's revenue and net income decline?
Consumer Banking revenue fell 3% YoY to $10.2B, mainly from lower average deposit balances, which dropped $57B (6%) to $949B. Net income declined to $2.6B from $2.9B. The segment still grew consumer investment assets 23% to a record $476B and added 278,000 net new checking accounts, its 22nd consecutive quarter of growth.

04—Continue

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