Bank of America reported higher-than-projected results for the third quarter as increased investment banking fees and trading revenue offset a decline in net interest income. The bank's revenue, net of interest expenses, rose to $25.35 billion for the three months ending on September 30, compared to $25.17 billion last year.
This figure surpassed the average analyst estimate of $25.23 billion according to Capital IQ. The improvement was largely attributed to increases in asset management and investment banking fees, coupled with stronger trading revenue, although partially impacted by declining net interest income (NII), as noted by the bank's financial statements. Earnings per share experienced a decrease from $0.90 to $0.81 year over year, but still exceeded the anticipated $0.76 on Wall Street.
The decline in net interest income was recorded at 3% on an annual basis, leading to a total of $13.97 billion. This was largely due to higher asset yields and loan growth being outweighed by rising deposit costs. Nevertheless, a sequential increase of 2% in NII was observed, according to Bank of America.
Additionally, the provision for credit losses grew to $1.54 billion, compared to $1.23 billion in the previous year. Chief Financial Officer Alastair Borthwick highlighted factors contributing to the change in NII during a conference call with analysts. He stated that global markets activity, pricing, and fixed asset repricing provided benefits to NII, although higher funding costs partially counteracted these gains.
The 50-basis-point rate cut executed by the Federal Reserve in September also adversely affected NII. The Federal Reserve's decision to lower its benchmark lending rate reflects a broader economic strategy, differing from a Bloomberg-compiled consensus which had anticipated only a quarter-percentage-point reduction. In the global markets segment, revenue rose by 14% year over year to $5.63 billion, driven primarily by enhanced trading revenue and investment banking fees.
Meanwhile, global banking revenue fell by 6% to $5.83 billion, and the division's earnings faced a dramatic drop of 26% year over year, influenced by a reduction in net interest income and escalating provisions, as noted by Borthwick during the call. Consumer banking revenue saw a slight dip of 1%, totaling $10.42 billion, while global wealth and investment management revenue climbed by 8% to $5.76 billion, supported by an increase in asset management fees. Looking ahead, consolidated NII is projected to grow in the fourth quarter to $14.3 billion or more on a fully tax-equivalent basis, as indicated by Borthwick.
This marks a comparison with NII of $13.95 billion recorded in the same period of 2023, reflecting an FTE basis of $14.1 billion. Borthwick expressed optimism regarding future prospects, stating, "We're poised to improve with NII from here. We have to watch what goes on with the rate curve when there's a surprise like an extra 25 basis points that will flow through the entire fourth quarter; it might set us back a few weeks.
But we just keep doing what we're doing; the organic growth is going to fuel the net interest income growth over time.".