Bank of America profits rose 32% in Q3

Bank of America (BofA) said Monday that its third-quarter profits rose 32% from a year ago, as higher interest rates allowed the bank to charge more for loans, and lower corporate tax rates helped it save hundreds of millions on taxes.

The Charlotte, North Carolina-based banking giant said it earned a profit of US$7.17 billion, or 66 cents a share (all following figures are in U.S. dollars). That’s up from $5.42 billion, or 46 cents a share, a year earlier.

Like other big banks that have reported so far this quarter, Bank of America’s quarterly results were driven by higher interest rates and lower taxes. BofA’s net interest income rose 6% from a year earlier to $11.9 billion.

“Responsible growth, backed by a solid U.S. economy and a healthy U.S. consumer, combined to deliver the highest quarterly pre-tax earnings in our company’s history,” said Brian Moynihan, the bank’s chief executive and chairman, in a statement.

While Bank of America had to pay more for deposits in the quarter, the bank was more than able to make up for it by charging borrowers more to take out loans. The bank’s net interest spread, which is the difference between how much banks pay for deposits compared to what it charges to loan money out, widened to 2.42% in the quarter.

Consumers trying to earn interest on their savings might want to look elsewhere. Bank of America paid roughly 0.50% on interest-bearing deposits, up from 0.38% a year earlier, among the lowest of the major banks to report this quarter.

BofA also paid significantly less in taxes for the quarter. While the bank’s pre-tax profits rose by more than $1.3 billion in the quarter, the amount of money the bank set aside to pay taxes fell by $300 million.

Bank of America’s corporate and investment banking division also had a solid quarter, despite mixed trading revenue. The division reported a pre-tax profit of $912 million, up from $756 million a year earlier. Bond trading revenues fell 5% to $2.1 billion, while stock trading was up 3%.

The bank’s total revenue rose to $22.78 billion in the quarter, beating analysts’ estimates.

BofA shares rose 16 cents to $28.63 in pre-market trading.

Ken Sweet, The Associated Press

Ken Sweet is a reporter with The Associated Press,  an American not-for-profit news agency headquartered in New York City and founded in 1846.