The third quarter profits of Bank of America dropped as it had been paying more to customers to hold their earnings. However, deposits beat estimates on investment banking and trading strength. Besides BofA, Goldman Sachs and Citigroup have also surpassed analyst’s estimates on Tuesday.
The Wall Street giants have gained from a deal-making activity, which bankers are hoping is the beginning of sustained rebounds following a torrid 2023.
There is a rise in confidence among investors that prompted them to issue more debt and equity, driving up investment banking charges by 18% compared to a year before $1.4 billion. Top US lenders are leaning more on their investment banking arms to bolster profitability as they grapple with falling interest rates.
“Our customers’ deposit balances and asset quality are healthy, and we believe we have good opportunities to grow,” Chief Financial Officer Alastair Borthwick told journalists.
Regarding investment banking, Borthwick said, “We feel pretty good-looking forward. We’ve got a good pipeline.”
A few weeks back, the Fed announced that they had cut down the interest rates by half a point, which let lender’s margins come under pressure this year as markets grew more confident. As interest rates decrease, Wall Street is optimistic that confidence for the deals and Initial Public Offerings that investment banks advise on will pick up.
David George, an analyst at Robert W. Baird has also shared his insights, “With capital markets driving the revenue upside, we expect more muted upside in the stock.”
Wealth and investment management revenue climbed 8% to $5.8 billion and saw client balances jump 18% to $4.2 trillion thanks to rising market valuations and client flows.
“The bank seems to be saying that things are getting better for them and all the challenges that they have faced in the last couple of years are easing,” stated Dave Ellison, a portfolio manager at Hennessy Funds, which holds BofA stock.
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