Bank of America's second-quarter profits jumped 33 percent from a year earlier, the company said Monday, as it cut expenses and, like nearly all other big banks, benefited greatly from the new tax law.
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The banking giant, based in Charlotte, North Carolina, on Monday reported earnings of $6.78 billion, or 63 cents per share, up from $4.75 billion, or 44 cents a share, in the same period a year earlier. That's better than the per-share projections of 57 cents from industry analysts, according to a survey by FactSet.
Bank of America has benefitted in recent years not only from an improving balance sheet — nearly all of the toxic assets from the financial crisis are now gone — but also from rising interest rates. BofA is among the most sensitive to changes in interest rates among the big financial institutions because it does so much consumer banking. The Federal Reserve has also pushed interest rates higher, another plus.
Net interest income across the bank rose $664 million, or 6 percent, compared to a year earlier.
While being able to charge borrowers more for loans, BofA has also been able to hold down the amount of money it has been paying to depositors. The bank is paying an average of 0.38 percent across all of its U.S.-deposits, up from 0.11 percent a year earlier, but well below its competition.
But it may have to start paying more for deposits in the future, however.
"We have been paying more for deposits, but the industry has yet to pay more on traditional bank accounts," said Paul Donofrio, BofA's chief financial officer, in a call with reporters. "It's a competitive world, and rates are going up, so I expect to see we will pay more down the road."
Like other big banks, BofA saw its tax bill drop substantially following the passage of President Donald Trump's tax law last year. BofA paid $1.71 billion in income taxes in the quarter, which is down from $3.02 billion in the same period a year earlier.
Revenue, net of interest expense, was $22.61 billion, down from $22.83 billion in the same period a year earlier.
Shares of Bank of America Corp., which are down more than 3 percent this year, edged slightly higher before the opening bell.
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