Bank of America execs talk growth in consumer activity on Q3 earnings call

Bank of America executives focused on the Charlotte company’s growth in consumer activity on their third-quarter earnings call with analysts today, highlighting year-over-year gains in deposit balances and lower credit delinquencies.

The bank’s CEO, Brian Moynihan, said on the call that he wouldn’t solely credit inflation as the reason for growth in consumer spending. He said transactions year over year are up by the single digits on a consistent basis.

“An analyst might wonder whether the talk of inflation, recession and other factors could rectify in a slower spending growth,” Moynihan said. “We just don’t see it here at Bank of America. Year-to-date spending of $3.1 trillion through September is up 12% compared to last year.”

While consumer spending rose 10% in September, activity slowed some from the 12% growth rate year to date — “which shows you that earlier in the year was a faster year-over-year growth rate,” he said. “But it’s still strong.”

BofA saw deposits this quarter increase by $20 billion from Q3 last year. Credit delinquencies dropped from 2.04% pre-pandemic in September 2019 to 1.38% the same month this year.

“As you can see, whether you look at early- or late-stage card delinquencies, they all remain well below our pre-pandemic levels,” Moynihan said. “These are decades-old lows, and we’re just now seeing gradual move off these lows in early-stage delinquencies. Late-stage delinquencies are still 40% below pre-pandemic levels.”

Bank of America Chief Financial Officer Alastair Borthwick added: “And as Brian noted earlier, we’re watching closely the early-stage card delinquencies as they begin to increase modestly.”

Bank of America joined its financial peers, such as Wells Fargo, in posting a year-over-year drop in net profit in Q3 as it put aside higher loan-loss provisions to prepare for economic uncertainties. BofA recorded net income of $7.1 billion, or 81 cents per diluted share in the third quarter. That’s an 8% decrease from $7.7 billion, or 85 cents per share during the same period last year. The bank set aside an $898 million provision for credit losses in the third quarter.

BofA’s revenue increased in this year’s third quarter to $24.5 billion. That’s 8% higher than $22.9 billion a year ago.

The bank’s net interest income rose to $13.8 billion in the most recent quarter — up from $11.1 billion in last year’s Q3. Those results were driven by higher interest rates and solid loan growth, among other factors.

Total loans and leases registered at about $1.03 billion in Q3, including $585 million in commercial loans and $449 million in consumer loans. That’s above the $921 million for last year’s third quarter, which included $501 million in commercial loans and $419 million in consumer loans.

Borthwick said he expects the bank’s net interest income in the fourth quarter to come in at least $1.25 billion higher than during Q3. In the second quarter, he’d told analysts he predicted net interest income to rise about $1 billion in Q3 and again in Q4, totaling a $2 billion increase for both periods. However, net interest income jumped $1.3 billion quarter over quarter, leading him to raise his expectation to an increase of at least $2.6 billion.

He also said he expects the bank’s full-year expenses to land at about $61 billion, which includes its recent settlement with Ambac Financial Group (NYSE: AMBC). CBJ previously noted that BofA had agreed to pay more than $1.8 billion to the bond insurer, which sued the bank over losses tied to Countrywide home loans. It was the last major legal battle for BofA stemming from the 2008 financial crisis and its purchase of the mortgage giant Countrywide.

Bank of America is the Charlotte area’s largest bank by local deposits. It has roughly 18,000 workers in the region.

The bank’s shares closed at $33.62 today, up from the closing price of $31.70 on Oct. 14. Its stock started the year at $49.18 per share.