BofA struggles with tepid loan income as consumers shun new debt

Bank of America is struggling to build back its lending income as consumers, flush with cash from government stimulus programs, avoid taking on new borrowings.

Loans and leases in the consumer banking unit fell 12% from a year earlier. Net interest income, on a fully taxable equivalent basis, was $10.3 billion last quarter, the bank said Wednesday. That metric was less than analysts’ estimated $10.5 billion.

While government aid programs during the pandemic have helped big lenders like Bank of America dodge widespread defaults, they’ve also meant many consumers and businesses haven’t needed to take on new loans or tap lines of credit. That trend, along with rock-bottom interest rates meant to stimulate the economy, have weighed on the profitability of banks’ core lending businesses.

Banks’ Wall Street operations have helped pick up the slack as turbulent markets boosted trading volumes. Companies seeking to stockpile cash, meanwhile, turned to debt and equity financing, and a combination of cheap financing for buyers and attractive valuations for sellers spurred a wave of acquisitions. Bank of America’s trading revenue fell 14% last quarter, while investment-banking fees fell 1.7%.

Bank of America was down roughly 2% to $39.05 at 7:56 a.m. in early New York trading. The Charlotte, North Carolina-based company has advanced 32% this year through Tuesday, compared with a 27% gain for the KBW Bank Index.

While loan balances remained down from a year earlier, they grew from the first quarter — the first sequential increase in a year.

“Consumer spending has significantly surpassed prepandemic levels, deposit growth is strong, and loan levels have begun to grow,” Bank of America Chief Executive Brian Moynihan said in a statement.

Also in the second-quarter results:

  • Noninterest expenses rose 12% to $15 billion.
  • Net income more than doubled to $9.2 billion, or $1.03 a share. Analysts estimated 77 cents, on average.
  • Total revenue dropped to $21.5 billion.

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