On July 16, 2024, Bank of America Corp (BAC, Financial) released its 8-K filing for the second quarter of 2024. The financial institution reported a net income of $6.9 billion, or $0.83 per diluted share, surpassing the analyst estimate of $0.80 per share. Revenue for the quarter was $25.4 billion, slightly above the estimated $25.22 billion.
Company Overview
Bank of America is one of the largest financial institutions in the United States, with more than $3.0 trillion in assets. It is organized into four major segments: consumer banking, global wealth and investment management, global banking, and global markets. Bank of America's consumer-facing lines of business include its network of branches and deposit-gathering operations, retail lending products, credit and debit cards, and small-business services. The company's Merrill Lynch operations provide brokerage and wealth-management services, as does its private bank. Wholesale lines of business include investment banking, corporate and commercial real estate lending, and capital markets operations. Bank of America has operations in several countries but is primarily US-focused.
Performance and Challenges
Bank of America Corp (BAC, Financial) reported a slight increase in revenue, net of interest expense, to $25.4 billion, up $180 million or 1% from the same quarter last year. This growth was driven by higher asset management and investment banking fees, as well as sales and trading revenue, which offset a 3% decrease in net interest income (NII) to $13.7 billion. The decline in NII was attributed to higher deposit costs that more than offset higher asset yields and modest loan growth.
The provision for credit losses increased to $1.5 billion from $1.1 billion in the same quarter last year, reflecting higher net charge-offs and a net reserve release of $25 million compared to a net reserve build of $256 million in Q2 2023. Noninterest expense rose by 2% to $16.3 billion, driven by investments in personnel and revenue-related compensation.
Financial Achievements
Bank of America Corp (BAC, Financial) achieved several notable financial milestones during the quarter. The company's Common Equity Tier 1 (CET1) capital increased by $1 billion from the previous quarter to $198 billion, resulting in a CET1 ratio of 11.9%, which is 122 basis points above the new regulatory minimum effective October 1, 2024. The bank returned $5.4 billion to shareholders through common stock dividends and share repurchases.
Book value per common share rose by 7% year-over-year to $34.39, while tangible book value per common share increased by 9% to $25.37. The return on average common shareholders' equity (ROE) was 10.0%, and the return on average tangible common shareholders' equity (ROTCE) was 13.6%.
Segment Highlights
| Segment | Net Income | Revenue |
|---|---|---|
| Consumer Banking | $2.6 billion | $10.2 billion |
| Global Wealth and Investment Management | $1.0 billion | $5.6 billion |
| Global Banking | $2.1 billion | $6.1 billion |
| Global Markets | $1.4 billion | $5.5 billion |
Income Statement and Balance Sheet Highlights
Bank of America Corp (BAC, Financial) reported total assets of $3.26 trillion, with average loans and leases of $1.05 trillion. Average deposit balances increased by $35 billion to $1.91 trillion. The bank's liquidity remained robust, with average Global Liquidity Sources of $909 billion.
From a profitability perspective, the bank's efficiency ratio was 64%, and the return on average assets was 0.85%. The bank's nonperforming loans and leases ratio stood at 0.52%, with an allowance for loan and lease losses ratio of 1.26%.
Commentary
From Chair and CEO Brian Moynihan: “Our team produced another strong quarter, serving a growing client base. 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. Our Global Markets business delivered its ninth consecutive quarter of year-over-year revenue growth in sales and trading, earning double-digit returns. Our investments in this business are delivering for our shareholders.”
Analysis
Bank of America Corp (BAC, Financial) demonstrated resilience and growth in Q2 2024, surpassing earnings expectations and maintaining strong capital ratios. The bank's diversified revenue streams and strategic investments in technology and personnel have positioned it well to navigate the current economic environment. However, the increase in provision for credit losses and higher deposit costs are areas to monitor closely as they could impact future profitability.
For more detailed insights and analysis, visit GuruFocus.com.
Explore the complete 8-K earnings release (here) from Bank of America Corp for further details.
