Bank of America’s Q2 Results Should Have Been Better

Bank of America Corp. (NYSE: BAC | BAC Price Prediction) reported second-quarter 2019 results before markets opened Wednesday. The big bank reported diluted earnings per share (EPS) of $0.74 on revenue of $23.1 billion. In the same period a year ago, the bank reported EPS of $0.63 on revenue of $22.5 billion. Second-quarter results also compare to the consensus estimates for EPS of $0.71 on revenue of $23.23 billion.

Net income rose 8% year over year, and net interest income rose by 3% ($361 million) and non-interest income rose by $174 million. Income tax expense dipped from $1.71 billion to $1.61 billion. Non-interest expense rose by $44 million to $13.29 billion.

Credit loss provision totaled $857 million in the quarter, up by $30 million compared with the same period in 2018. In the global banking division alone, credit loss provision rose by $148 million year over year to $125 million. Bank of America said the increase was “driven primarily by the absence of 2Q18 energy reserve releases.”

Net charge-offs decreased by $109 million to $887 million, and the net charge-off ratio dropped from 0.43% to 0.38%, year over year. The bank did not report any release from reserves in the first quarter.

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CEO Brian Moynihan said:

Our view of the economy reflects the activity by the one-in-two American households we serve, which points to a steadily growing economy. We see solid consumer activity across the board, with spending by Bank of America consumers up five percent this quarter over the second quarter of last year.

The bank did not provide guidance in its earnings release. The consensus estimate for third-quarter EPS is $0.70 on revenues of $23.11 billion. For the full 2019 fiscal year, the consensus calls for EPS of $2.82 on revenues of $92.37 billion. Consensus estimates for both annual EPS and revenues have declined since the end of the first quarter.

Bank of America is set to be one of the top 10 banks repurchasing stock in the coming years. The bank’s board has authorized share buybacks and dividend payments totaling $37 billion over the next four quarters. It has revealed plans to increase its quarterly common dividend by 20% to $0.18 per share (up from $0.15).

Shares traded lower by about 0.1% in the premarket Wednesday, at $28.95. The current 52-week range is $22.66 to $31.91. Analysts had a 12-month consensus price target of $33.13 before results were announced.
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