Financial institution of America shares fall because the lender misses third quarter earnings amid low rates of interest
Bank of America stocks fell Wednesday after the lender released third quarter results that missed sales.
The bank said it had total sales of $ 20.45 billion, missing the $ 20.8 billion estimate asked by Refinitv. Earnings for the quarter fell 16% to $ 4.9 billion, or 51 cents per share, beating the estimate of 49 cents.
The company's shares fell 5.3%.
Analysts have long viewed Bank of America, with its huge deposit base, as the big bank, most sensitive to interest rate fluctuations. The industry came under pressure after the Federal Reserve announced it would maintain a zero interest rate policy for years in response to the coronavirus pandemic. That pushes the spread banks earn when they take out deposits and lend.
The bank's net interest income declined 17% year over year to $ 10.2 billion for the quarter. CEO Brian Moynihan said the metric is expected to bottom out in the third quarter. The company also missed net interest margin, a related metric that was 1.72% and 10 basis points below estimate.
While rivals JPMorgan Chase and Goldman Sachs each achieved trading results that exceeded expectations by hundreds of millions of dollars, Bank of America did not fare as well. The company's bond trading counters had sales of $ 2.1 billion, matching Refinitiv's estimate of $ 2.28 billion. The bank's stock deals were valued at an estimated $ 1.2 billion.
The bank said it had accrued $ 1.4 billion in loan loss provisions for the quarter, far less than $ 5.1 billion in the prior period. Bank of America, the second largest U.S. lender by assets, set up a $ 9.8 billion provision for loan losses in the first two quarters of 2020.
JPMorgan and Citigroup each released results that exceeded analysts' expectations as they made less money available for defaulting loans.
Bank of America stocks are down 29% this year to yesterday, slightly better than the KBW Bank Index.
This is how the company did it:
Result: 51 cents per share compared to the estimate of 49 cents of the analysts surveyed by Refinitiv.
Revenue: $ 20.45 billion versus an estimate of $ 20.8 billion.
Net Interest Margin: 1.72% versus FactSet's 1.82% estimate.
Trading Income: Fixed Income of $ 2.1 billion versus an estimate of $ 2.28 billion, stocks of $ 1.2 billion versus an estimate of $ 1.2 billion