Via Financial Times

Bank of America reported industry-leading growth in investment banking fees, driving better than expected quarterly results despite headwinds from a slower US economy, lower interest rates, and choppy markets.

Investment banking fees surged 27 per cent, to $1.5bn, with the strong growth across debt underwriting, debt syndication, and merger advisory. The performance outpaced rivals, indicating that BofA is taking market share.

At JPMorgan Chase and Citigroup, investment banking fees rose 8 per cent and 4 per cent respectively in the quarter. At Goldman Sachs they fell 15 per cent.

September set industry records for debt issuance, as companies rushed to refinance at lower rates, and BofA’s chief executive Brian Moynihan attributed the strength to participating in many of the quarter’s biggest deals.

The results impressed industry analysts. “Bank of America has the eye of the tiger — they see what they want and they go after it,” said Wells Fargo analyst Mike Mayo, referring to the growth in investment banking fees “We heard adjectives such as ‘bumbling’ used a few years ago [of BofA’s investment bank] but this is best in class performance.”

Earnings per share were 75 cents for the third quarter, adjusting for a charge related to the bank’s sale of a joint venture, up 14 per cent from a year ago and ahead of Wall Street expectations of 69 cents. Revenue was flat from the year before at $22.8bn.

As for all banks, falling interest rates were a significant barrier to growth, and BofA is particularly sensitive to falling rates; its large base of low-cost retail deposits means its cost of capital falls relatively little as rates decline. Net interest income, at $12.1bn, hardly grew, despite good loan growth.

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Still, analysts were impressed that net interest income did not fall, and that lending margins compressed only slightly. James Shanahan of Raymond James said Bank of America was proving to have “a pretty good ability to manage though a challenging environment”.

The US consumer provided some support. Spending on Bank of America credit and debit cards rose 7 per cent in the quarter, continuing a pattern seen across the US economy of robust consumer activity paired with more uneven sentiment among businesses and investors.

Choppy markets left the bank’s fixed-income trading businesses with flat revenues, but equities trading took up some of the slack, rising 13 per cent, better than rivals.