Key Metrics
Key Operating Metrics for Bank of America Corp (BAC) Q3 2024 Earnings
Consolidated Metrics
- Noninterest Expense: $16,479 million (4% yoy)
- Provision for Credit Losses: $1,542 million
- Net Charge-offs: $1,534 million
- Ending Deposits: $1,920,748 million (grew by $20 billion)
- Book Value: $35.37
- Tangible Book Value: $26.25
Investment Banking/Market Results
- Debt Capital Markets Fees: $332 million (18% yoy)
- FICC ex-DVA: Increased by 8% yoy
- Equities ex-DVA: Increased by 18% yoy
Forward guidance
- Net Interest Income (NII) Guidance: Expect NII to grow to $14.3 billion or more in Q4 2024, assuming a 25 basis point rate cut in November and another in December.
- 2025 Outlook: Anticipate a return to operating leverage and improvement in efficiency ratio as NII growth complements fee growth.
- Expense Projections: Q4 expenses expected to remain in line with Q3 at $16.5 billion.
- Loan Growth: Modest loan growth expected to continue, with a pickup noted late in Q3, particularly in commercial loans.
- Capital Return: $5.6 billion returned to shareholders in Q3 2024, including $2 billion in dividends and $3.5 billion in share repurchases.
- Credit Loss Provisions: Reserve levels are maintained for an unemployment rate of 5% by the end of 2025.
- Effective Tax Rate: Current effective tax rate is 6%, with an adjusted rate of approximately 24% excluding discrete items.
Key takeaways
- Positives:
- Brian Moynihan noted, "Consumer payments were up 4% to 5% year-over-year," indicating stable consumer activity and spending, which supports overall economic health.
- The bank's net interest income (NII) grew 2% this quarter, with expectations for further growth in Q4, suggesting a positive trend in profitability despite a fluctuating rate environment.
- Bank of America added 360,000 net new consumer checking accounts, reflecting strong organic growth and customer acquisition, which is crucial for future revenue generation.
- Alastair Borthwick highlighted, "We expect to see roughly $200 million benefit in Q4 from the BSBY alternative rate transition," indicating proactive management of interest rate risks.
- The bank returned $5.6 billion in capital to shareholders, demonstrating a commitment to shareholder value amidst solid earnings.
- Negatives:
- Moynihan acknowledged, "Line of credit usage rates remain lower than pre-pandemic levels," indicating cautious behavior among small and medium-sized businesses due to high borrowing costs.
- The bank's efficiency ratio worsened to 65%, with Alastair Borthwick attributing this to increased incentive compensation related to higher fee business activity, suggesting operational challenges in managing costs.
- Despite strong consumer account growth, Moynihan noted, "Consumer deposits still shrinking a little bit," indicating potential volatility in deposit stability amidst changing interest rates.
- Borthwick mentioned, "We haven't put that in our guidance at this stage," regarding loan growth, reflecting uncertainty in future lending demand despite recent improvements.
- The bank's Global Banking segment saw a 26% year-over-year decline in earnings, primarily due to lower NII and higher provision expenses, highlighting pressures in that area.
Peer Summary
- Consumer Behavior: JPMorgan Chase noted, "We expect deposits to be relatively flat for the remainder of the year," indicating a cautious consumer sentiment that may affect deposit stability across the sector.
- Loan Demand: Wells Fargo highlighted, "Commercial loan demand remains weak, reflecting economic uncertainty," suggesting a broader trend of hesitance in borrowing among businesses, which could impact overall loan growth.
- Credit Quality Concerns: Citigroup acknowledged, "Lower discretionary spending is impacting our retail services portfolio," indicating a potential rise in credit risk as consumers become more cautious.
- Investment Banking Activity: Citigroup reported a 44% increase in investment banking fees, with Jane Fraser stating, "Corporate sentiment remains positive," suggesting a favorable environment for investment banking that may not be uniformly experienced across competitors.
- Expense Management: Truist Financial projected a 4% increase in adjusted expenses, with Bill Rogers emphasizing, "Our efficiency ratio improved," reflecting ongoing challenges in managing costs amid rising operational pressures.
