Bank of America Defies Expectations with Strong Investment Banking Performance

Bank of America's second-quarter profit fell due to higher deposit costs impacting interest income. However, the bank exceeded analysts' expectations, driven by investment banking and trading. CEO Brian Moynihan noted growth in consumer checking accounts, and the bank forecasts a rebound in its net interest income by the fourth quarter.

Bank of America's second-quarter profit dropped as higher deposit costs pushed its interest income lower, but the results beat analysts' estimates, boosted by investment banking and trading.

Shares climbed more than 4% after BofA also forecast better-than-expected net interest income (NII) - the difference between what banks earn on loans and pay out on deposits - for the fourth quarter. CEO Brian Moynihan cited growth in new consumer checking accounts for the 22nd consecutive quarter in a conference call with analysts. He began the call by wishing former U.S. president Donald Trump a speedy recovery after an assassination attempt on Saturday.

Investment banks have brought in more underwriting fees as capital markets resurged. A resilient U.S. economy has encouraged companies to raise capital by selling stocks and issuing bonds in recent months. Mergers and acquisitions are also gaining momentum, boosting advisory fees for investment banks. BofA's investment banking fees jumped 29% to $1.6 billion in the second quarter, echoing results at peers.

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. BofA's net interest income fell 3% to $13.7 billion in the second quarter. Provisions for credit losses rose to $1.5 billion from $1.1 billion a year earlier.