Bank of America sees net interest income stabilizing by year’s end
Bank of America Corp BAC.N Chief Executive Officer Brian Moynihan told investors on Tuesday that the worst pandemic-related revenue declines could soon be in the rear-view mirror.
Speaking at the Barclays Global Financial Services Conference, Moynihan said third quarter net interest income, a closely watched measure of how much money the bank makes from lending, is expected to fall by up to $700 million due to a drop-off in loan demand. However, he predicted revenue will stabilize going into the end of the year.
“It looks like 3Q will be the bottom,” he said. “It’ll take another several quarters before it really starts growing again … But right now, it looks like this quarter could be the trough based on everything I see.”
Bank profitability took at hit in the first half of the year as the four largest U.S. lenders set aside nearly $60 billion to brace for potential loan losses as the coronavirus pandemic halted economic activity across the country. The Federal Reserve also slashed interest rates nearly to zero in response to the crisis, further limiting how much banks could make from lending.
Bank of America, the second largest U.S. bank by assets, does not expect to need to book another significant expense for loan loss reserves in the third quarter based on current trends.
“We set our second quarter reserves with a set of scenarios that had turned out that the actual data has been better,” Moynihan said.
Fee-based income continues to be a bright spot for the bank, though at more modest levels. Trading revenue is expected to be up 5% from last year compared with a 35% surge in the second quarter. Investment banking fees, which saw a record 57% jump last quarter, are expected to grow between 3% and 5%.