(Bloomberg) -- Bank of America Corp. posted the biggest jump in investment-banking fees on Wall Street, helping profit overcome headwinds from lower interest rates.
Shares of the company climbed as much as 3.3% after the bank reported an unexpected surge in third-quarter debt underwriting fees. The firm’s traders also boosted revenue, helping pushing profit above analysts’ estimates. Gains in advisory fees also surpassed rivals in the best quarter for the investment-banking unit in more than two years.
The 27% increase in fees shows progress by corporate and investment-banking chief Matthew Koder, who’s overhauling the unit after executives admitted last year they had pulled back too much on risk. Koder is reinvigorating efforts to clinch more midsize transactions in the U.S. and has been adding dozens of bankers across the division.
“We have, over the last four or five quarters, boosted the intensity in that business,” Chief Financial Officer Paul Donofrio said on a call with journalists. The lender has encouraged staff in its commercial and wealth-management units to cooperate on bringing in more business, and “we’re seeing some results -- we’re seeing the number of deals in our pipeline go up,” Donofrio said.
Alison Williams, an analyst at Bloomberg Intelligence, said the investment-banking results benefited from being compared to a relatively soft third quarter a year ago, but she said the performance was “still impressive, especially in the M&A line, and that’s an area that investors have been a little bit more worried about.”
Chief Executive Officer Brian Moynihan expressed confidence in the U.S. economy even as the Federal Reserve cuts interest rates and growth estimates are revised down. Lower borrowing costs are a major headwind for banks, while concerns about a global economic slowdown and trade tensions stymie client activity.
“The U.S. economy is still in solid shape, despite the worries and concerns about trade wars, capital-investment slowdowns or other global macro conditions,” Moynihan said on a conference call with analysts. “Across nearly every line of business, we are seeing strong customer activity.”
In the consumer division, net income climbed 5.3% to $3.3 billion as loan and deposit growth drove net interest income higher, according to a statement from the Charlotte, North Carolina-based company. Wealth-management profit rose 8.3% to $1.1 billion.
Bank of America’s net interest income -- revenue from customers’ loan payments minus what the company pays depositors -- rose 1% to $12.3 billion in the third quarter, matching the average estimate in a Bloomberg survey. The company said it was sticking with its forecast for 1% NII growth this year.
Bank of America shares advanced 2.4% to $30.45 at 9:36 a.m. in New York. They’ve gained 25% this year, compared with an 18% increase for the KBW Bank Index.
The bank broke its four-quarter streak of record profits as it took a $2.1 billion impairment charge tied to the end of its payments joint venture with First Data Corp. Its 18-quarter streak of positive operating leverage also came to an end.
JPMorgan Chase & Co. on Tuesday posted a surprise jump in revenue from investment banking, as well as the biggest increase in fixed-income trading revenue in almost three years. But Goldman Sachs Group Inc. reported a bigger drop in investment-banking fees than analysts had predicted, down 15% from last year’s third quarter.
(Updates with analyst’s comment in fifth paragraph, CEO’s comments starting in seventh.)
To contact the reporter on this story: Lananh Nguyen in New York at firstname.lastname@example.org
To contact the editors responsible for this story: Michael J. Moore at email@example.com, Steve Dickson, Steven Crabill
For more articles like this, please visit us at bloomberg.com
©2019 Bloomberg L.P.