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July 14, 2021

Bank of America Q2 2021 earnings beat forecasts on loan loss reserve releases, revenue declines

By Douglas Blakey

Bank of America Q2 2021 net income of $9.2bn compares with $3.5bn for the year ago period. But revenue, net of interest expense, falls by 4% year-on-year to $21.5bn. Moreover, net interest income declines by 6% to $10.2bn, driven primarily by lower interest rates. At the same time, non-interest income is down by 2% to $11.2bn, driven by lower sales and trading revenue.

Meantime, other less positive metrics include a 12% rise in non-interest expenses to $15.0bn, reflecting higher compensation and benefits costs. And average loan and lease balances in business segments are down by 11% y-o-y to $889bn.

Bank of America Q2 2021 highlights

There are however a number of positive metrics. For example, deposits rise by $231bn, or 14%, to $1.9trn.

Provision for credit losses decrease $6.7bn to a benefit of $1.6bn. This reflects a reserve release of $2.2bn amid an improved macroeconomic outlook. Consumer banking highlights include a 21% rise in deposits to a record $979bn. Consumer investment assets are up $100bn, or 40%, to a record $346bn. This is driven by market valuations and client flows of $21bn since the second quarter last year.

Accelerated client activity results in combined credit and debit card spend up by 16% from the previous quarter.

Specifically, combined credit/debit card spend is up 40% y-o-y. Credit card spend is up by 46% while debit card spend ahead by 36%.

Other retail banking highlights include the bank’s Preferred Rewards programme. Enrolled client are up by 14% to 7.6 million with a 99% annualised retention rate.

And against the backdrop of muted loan demand, it is notable that total mortgage originations are up 36% quarter-on-quarter.

Chairman and CEO Brian Moynihan says:  “We delivered solid earnings and returned more capital to shareholders during the quarter as we moved to a more open economy.

“More than 85% of our buildings and offices are open, and we’re welcoming our teammates back. This means more face-to-face meetings; helping to increase sales of Consumer products and drive strong household growth in Wealth Management. Consumer spending has significantly surpassed pre-pandemic levels, deposit growth is strong, and loan levels have begun to grow.”

Digital banking highlights: 31.8m mobile banking customers

The bank ends the second quarter with 40.5 million active digital users, up 3%. Active mobile banking customers increase from 30.3 million a year ago to 31.8 million.

Digital sales are up by 26% to 1.4 million. Bank of America now has 14.3 million active Zelle users. Zelle clients sent and received 189 million transfers worth $56.5bn up 62% and 76% YoY, respectively. Meantime, customers booked a record 871,000 digital appointments with bank personnel.

Bank of America ends the second quarter with 4,296 branches, down by only 2 from a year ago.

At around $40, the Bank of America share price is up by 33% for the year to date and a market cap of about $341bn.

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