Bank of America (BoA) has delivered its fifth straight quarter of operating leverage, according to Chair and CEO Brian Moynihan.
Speaking on the Earnings Conference Call, Moynihan said that every business segment delivered operating leverage in Q3 2022.
“This takes us back to our five year run before this pandemic. The highlights of this quarter were also once again marked by good organic customer activity. This was coupled with a significant increase in net interest income,” he said.
BoA’s highlights for the third quarter ended September 30, 2022 include Net Income of $7.1bn; EPS of $0.81, Revenue growth by 8% led by 24% Improvement in Net Interest Income to $13.8bn; and CET1 Ratio of 11.0%.
Moynihan said the teams “adapted well” to the new capital requirements.
“As a result, our common equity tier one ratio or CET1 ratio improved by nearly 50 basis points to 11%,” he said.
From a return perspective, the Bank produced a 50% ROTC and a 90 basis point ROA.
The efficiency ratio in Q3 dropped to 62%, according to Moynihan.
“Taking out the litigation, it would have been 61%. So even while investing in marketing and people in technology and physical plan to team continues to drive operational excellence.
“We’ve also managed our expenses very well. We drove operating leverage, the team managed the balance sheet well, we improved capital, increased our dividend and bought back a modest amount of shares. We call that responsible growth,” Moynihan said.
According to the results, Net interest income of $13.8bn increased $2.7bn YoY and $1.3bn from 2Q22, driven by benefits from higher interest rates, including lower premium amortization expense, and higher loan balances.
In Global Wealth & Investment Management, Net income of $1.2bn decreased 3% from 3Q21, while Revenue of $5.4bn increased 2% compared to 3Q21, driven by higher NII, partially offset by the impact of lower market valuations on noninterest income.
In Global Banking, Net income of $2.0B decreased 20% from 3Q21, while Revenue of $5.6B increased $0.3bn vs. 3Q21.
“The banking capabilities and success differentiates our platform. The business grew revenue, delivered operating leverage and saw record pre tax pre provision growth even in choppy markets,” commented Moynihan.
In Global Markets, Net income of $1.1bn increased 15% from 3Q21, while Revenue of $4.5bn decreased 1% from 3Q21, primarily driven by lower investment banking fees, partially offset by higher sales and trading revenue; Reported sales and trading revenue of $4.1bn increased 13% from 3Q21.
The third quarter of 2022 was the strongest since the third quarter of 2010, according to Moynihan.
“It grew 30% from last year. It was led by strong performance on macro effect business, which has benefited by investments made over the past year,” he said.
Alastair Borthwick, Chief Financial Officer, said on the results call the the average liquidity portfolio declined in the quarter reflecting the decrease in deposits and security levels.
“At $941bn our liquidity still remains $365bn above pre-pandemic levels,” he stressed.
Non-interest expense increased $863m, or 6%, to $15.3bn and included $354m related to the settlement of legacy monoline insurance litigation, according to the results.
The capital levels today remain strong with $176bn of CET1, according to Borthwick.
“We improved our CET1 ratio by 49 basis points compared to June 30. Taking us to 11% That leaves us well above our new 10.4% minimum requirement,” Borthwick said.
“We delivered a solid quarter for shareholders as we continued to execute on our responsible growth strategy, ” he concluded.
