A Bank of America logo is seen on the entrance to a Bank of America financial centre in New York City, the US. Bank of America's profit fell in the second quarter fell to US$6.9 billion (RM32.23 billion), compared with US$7.4 billion as net interest income shrinks.

BENGALURU/NEW YORK (July 16): Bank of America's (BofA) profit fell in the second quarter (2Q) as its income from interest on loans shrank and it set aside more money to cover potential credit losses.

A better-than-expected forecast for fourth-quarter (4Q) net interest income (NII), however, sent shares up 1% in pre-market trade.

"The strength and earnings power of our leading consumer banking business is complemented by the growth and profitability of our global markets, global banking, and wealth management businesses," CEO Brian Moynihan said in a statement on Tuesday.

The second biggest US lender earned US$6.9 billion (RM32.23 billion), or 83 cents per share, in 2Q ended June 30, compared with US$7.4 billion, or 88 cents per share, a year earlier, it said in a statement.

Banks are shelling out more on deposits as interest rates are at their highest since 2007, which have boosted returns on bonds, making alternatives such as money market funds more attractive.

The cost of preventing a deposit drain has eroded banks' gains from the rising interest payments that they are charging borrowers.

BofA's NII in 2Q fell 3% to US$13.7 billion. Provisions for credit losses were US$1.5 billion, higher than US$1.1 billion a year earlier.

The bank said it expects NII in 4Q to be US$14.5 billion, higher than the US$14.4 billion analysts were predicting, according to LSEG.

Investment banking

A resurgence in capital markets, due to resilience of the US economy that encouraged companies to raise capital through selling stocks and issuing bonds in recent months, has boosted underwriting fees at investment banks.

Mergers and acquisitions are also gaining momentum, boosting advisory fees for investment banks. BofA's investment banking fees jumped 29% to US$1.6 billion.

The unit faced tougher year-over-year comparisons versus peers. In 2Q of 2023, BofA's investment banking fees grew 7%, while JPMorgan Chase and Citigroup had reported a drop.

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