Bank of America reported a 10% increase in third-quarter profits on Tuesday, aided by higher interest rates that enabled the bank to charge more for loans while effectively managing expenses, Ken Sweet's report for the Associated Press (AP) highlighted these developments.
The Charlotte, North Carolina-based bank recorded a profit of $7.8 billion, equivalent to 90 cents per share. I Photo: Tony Webster Flickr
However, CEO Brian Moynihan cautioned that Americans are continuing to reduce their spending, having depleted their pandemic savings, and are now grappling with increased costs resulting from inflation.
The Charlotte, North Carolina-based bank recorded a profit of $7.8 billion, equivalent to 90 cents per share, surpassing Wall Street's expectations by 13 cents, as per a survey of analysts conducted by FactSet.
This also outperforms last year's $7.1 billion profit, or 81 cents per share, for the same period.
The bulk of the increased profits can be attributed to the higher interest rates on loans, resulting in net interest income of $14.4 billion, compared to $13.76 billion from the previous year.
With much of the pandemic savings exhausted, consumers are increasingly relying on credit cards to manage their expenses.
BofA observed an increase in credit card balances to $98 billion in the quarter, as opposed to $85 billion a year ago. The bank also witnessed higher charge-offs in this quarter, representing money it does not expect to recover from credit card usage.