Bank of America said Monday it made record profit during the third quarter of this year, an achievement the Charlotte-based bank said was helped by an improving U.S. economy.
Profit rose 32 percent from the same period a year ago to $7.2 billion, the bank said. Revenue grew 4 percent from higher interest rates and growth in deposits and loans, among other factors.
The profit figure surpassed Bank of America’s previous record of $6.9 billion from the first quarter of this year. Bank of America, like its competitors, is benefiting from Federal Reserve increases to interest rates, which have led banks to charge more interest to borrowers while not paying many savers more for their deposits. Banks are also getting a boost from the federal tax cuts passed by Congress last year that slashed the corporate tax rate.
“We feel really good about the U.S. economy,” Chief Financial Officer Paul Donofrio said in a call with reporters. He said consumer confidence is at historically high levels, wages are starting to rise and unemployment remains low.
“There’s not a lot not to like,” he said.
In the quarter, Bank of America also lowered its expenses, which has been a key focus of CEO Brian Moynihan’s since taking over in 2010. Moynihan has sold business lines and trimmed hundreds of branches to reduce costs at a bank that had ballooned to a nationwide giant over decades of acquisitions.
Employment at the bank in the third quarter fell by 5,158 positions from a year ago. That’s a slower pace than about three years ago, when the bank was shedding more than twice that amount.
Non-interest expenses, a category that includes items like labor costs, declined by $327 million, or 2 percent, from the same quarter last year.
Across the company, Bank of America continues to use automation to replace repetitive work, Moynihan said. In April, it rolled out a Siri-like “virtual assistant” for smartphones called Erica, which the bank said Monday has 3.4 million users.
“Headcount reductions are due to a continuing applying of technology,” Moynihan said.
But the bank, which employs about 15,000 people in the Charlotte metro area, also said Monday that since 2015 it has added 6,000 employees companywide to work with clients in its consumer banking operation and plans to add 5,000 more over the next four years. As of Sept. 30, the bank’s total employment was 204,681.
Moynihan, who helped guide the company through costly financial-crisis era legal settlements, has continued to pursue what he calls a “responsible growth” strategy at the second-largest U.S. bank by assets. Those plans include not going beyond a certain risk appetite for the sake of short-term gains, the bank has said.
On Monday, executives faced questions about whether the bank’s conservative approach is hurting revenue growth in its investment banking business. The bank said investment banking fees fell 18 percent to $1.2 billion in the quarter.
Moynihan admitted that the bank in the quarter failed to get its fair share of business from mergers and acquisition deals, and Donofrio said the bank’s market share in that area declined during the period.
“I think we know we can do better,” said Donofrio, a former co-head of investment banking at Bank of America. “There’s very few banks that can do for clients what we can do for them in every major market around the world. ... There is really no reason we can’t execute on this opportunity.”
Bank of America was the latest large U.S. bank to disclose financial results for the third quarter of this year.
Last week, Wells Fargo said its profit rose 32 percent. The fourth-largest U.S. bank by assets maintains its largest employment hub in Charlotte.
Citigroup, the third-largest U.S. bank by assets, said its profit increase approximately 12 percent from a year earlier. JPMorgan Chase, the largest bank, reported a roughly 24 percent increase in profit. Both are based in New York.
Bank of America’s income tax expense also fell, helping its results. That expense declined by $360 million, or more than 16 percent.
Donofrio noted that the bank’s results were strong even excluding the lift it received from the federal tax cut. Its pre-tax profit of $9 billion was also a record, he said.
Companywide, Bank of America said total deposits rose nearly 5 percent from a year ago to about $1.3 trillion, and total loans and leases increased less than 1 percent to about $929.8 billion.
The Fed’s continued increases in short-term interest rates have resulted in a boost to the interest banks make off their customers. The central bank’s most recent increase occurred last month.
Following those increases, Bank of America, like other banks, have raised the interest they charge borrowers — while being slower to pay higher interest to ordinary savers for their deposits.
Donofrio said the bank has been increasing deposit rates for other clients, such as those in its wealth management business.
“We and the industry have not increased deposit rates appreciably in traditional sort of consumer bank accounts. I think the reason for that is because Bank of America delivers a lot of value to depositors,” he said, including convenience, mobile and online banking services and a nationwide branch network.
“This value, plus the lack of market pressure so far, has allowed us to keep deposit rates relatively flat on traditional retail accounts,” he said, adding that rates will eventually rise for mom-and-pop savers.