BAC Q2 Earnings Beat on Robust Trading & NII Growth, Stock Rises
BAC shares gained 1.3% in early trading in response to the better-than-expected quarterly results. A full day's trading session will depict a clearer picture.
Behind BAC's Headline Numbers
Bank of America recorded an improvement in trading numbers for the 13th straight quarter. Sales and trading revenues, excluding net DVA, grew 14.9% year over year to $5.38 billion. Fixed-income trading fees increased 18.6%, while equity trading income rose 9.6%. We had projected sales and trading revenues (excluding net DVA) of $4.92 billion.
This, along with higher net interest income (NII), was the major revenue growth driver for Bank of America. NII grew on a year-over-year basis as fixed-rate asset repricing, and deposit and loan growth were partially offset by the impacts of lower interest rates.
However, the investment banking (IB) performance was subdued once again. IB fees (in the Global Banking division) of $767 million declined 8.1% year over year. Equity and debt underwriting income declined 13.3% and 4.7%, respectively. Advisory revenues were down 9.6%.
Provisions and non-interest expenses increased in the quarter on a year-over-year basis.
The company's net income applicable to common shareholders grew 3.7% from the prior-year quarter to $6.83 billion. Our estimate for the metric was $6.76 billion.
BAC's Revenues Improve, Expenses Rise
Net revenues were $26.46 billion, which missed the Zacks Consensus Estimate of $26.59 billion. However, the top line increased 4.3% from the prior-year quarter.
NII (fully taxable-equivalent basis) grew 6.9% year over year to $14.82 billion. Our estimate for NII was $14.93 billion. Net interest yield expanded 1 basis point to 1.94%. We expected the metric to be 2.03%.
Non-interest income increased 1% from the prior-year quarter to $11.79 billion. This was driven by higher total fees and commissions. We had projected non-interest income of $11.78 billion.
Non-interest expenses were $17.18 billion, up 5.4% year over year. The rise was due to an increase in almost all cost components except for professional fees. Our estimate for non-interest expenses was $16.96 billion.
The efficiency ratio was 64.93%, up from 64.26% in the year-ago quarter. A rise in the efficiency ratio indicates a deterioration in profitability.
Bank of America's Credit Quality: A Mixed Bag
Provision for credit losses was $1.59 billion, up 5.6% from the prior-year quarter. We estimated the metric to be $1.54 billion.
Net charge-offs declined marginally year over year to $1.53 billion. As of June 30, 2025, non-performing loans and leases as a percentage of total loans were 0.52%, unchanged year over year.
BAC's Capital Position Strong
Book value per share as of June 30, 2025, was $37.13 compared with $34.39 a year ago. Tangible book value per share was $27.71, up from $25.37 a year ago.
At the end of June 2025, the common equity tier 1 capital ratio (advanced approach) was 13%, compared with 13.5% as of June 30, 2024.
BAC's Share Repurchase Update
In the reported quarter, the company repurchased shares worth $5.3 billion.
Our Take on Bank of America
Bank of America's focus on digitizing and expanding operations, decent loan growth and relatively higher interest rates are likely to keep supporting growth. However, elevated expenses and a challenging operating backdrop pose major headwinds.
Currently, BAC carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Performance & Earnings Release Date of BAC's Peers
Solid trading and IB performance, and impressive growth in credit card and wholesale loans drove JPMorgan 's JPM second-quarter 2025 adjusted earnings of $4.96 per share. The bottom line handily surpassed the Zacks Consensus Estimate of $4.51.
This excluded an income tax benefit of $774 million. Including the one-time gain, JPMorgan's earnings were $5.24 per share.
Markets revenues exceeded management's expectations of growth in the mid to high-single-digit range. The metric jumped 15% year over year to $8.9 billion.
JPMorgan's IB business performance was also far more robust than expected by management. Total IB fees (in the Commercial & Investment Bank segment) were up 7% from the prior-year quarter to $2.51 billion.
Truist Financial Corporation TFC is slated to report quarterly results on July 18. The Zacks Consensus Estimate for Truist's second-quarter earnings has been revised downward over the past seven days. (Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.)
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