Bank of America Beats 2nd-Quarter Earnings Estimates

Stock gains 2% after positive earnings report

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Jul 16, 2018
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Bank of America (BAC, Financial) is the fourth big bank to report earnings. The bank began the week with a strong earnings report before the opening bell Monday, following earnings releases from Citigroup, JPMorgan and Wells Fargo last week.

The large U.S. banking conglomerate reported second quarter earnings per share of 63 cents, beating estimates by 6 cents. Revenue was also a beat at $22.61 billion, outperforming by $340 million. With the newly reported second quarter results, the bank is now the third large bank to beat earnings estimates for the quarter.

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Source: Wall Street Journal

Revenue

Total revenue for the quarter was $22.609 billion with the greatest contribution from loans and leases at $10.071 billion. Investment and brokerage services was also a leading contributor at $3.458 billion. Loans and leases increased 13% from the comparable quarter while investment and brokerage services was down by $2 million. Within the Global Market segment, trading revenue was also notably higher for the quarter at $3.596 billion versus $3.369 billion in the second quarter of 2017. Overall, revenue for the bank was down 96 basis points from the comparable quarter.

Earnings

Earnings for the quarter were $6.8 billion, increasing from $5.1 billion in the comparable quarter. Non-interest expenses were down slightly during the quarter at $13.284 billion compared to $13.982 billion in the second quarter, which helped earnings to increase. Consumer Banking was the company’s top income contributor with $2.883 billion in earnings. Income increased across all of the firm’s business segments in the second quarter with Consumer Banking reporting the largest gain at 42%.

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Stock investment

Bank of America gained 2.38% in mid-morning trading Monday to a value of $29.20. Analysts have a one-year estimate of $34.43 as interest rates continue to rise helping net interest income projections. The stock is also trading below its discounted cash flow value of $39.84. Free cash flow has been high at $63.75 billion for the trailing-12 months supporting its intrinsic value and dividend. The dividend has been steady over the past year at 12 cents quarterly resulting in a trailing and forward dividend yield of 1.68%.

Disclosure: I do not directly own any shares of Bank of America.