Bank of America profit beats estimates as market turmoil boosts trading

By Pritam Biswas, Nupur Anand, Arasu Kannagi Basil

July 16 (Reuters) - Bank of America BAC.N beat estimates for second-quarter profit on Wednesday, driven by tumultuous markets that helped its traders bring in more revenue, while its interest income also rose.

Banks' trading desks benefited from market turbulence as clients reacted to shifting U.S. trade policies and escalating geopolitical tensions during the second quarter.

The bank's shares, which have gained over 4% this year, fell nearly 1% after markets opened. BofA's stock has underperformed its major peers and the broader KBW Bank Index .BKX in 2025.

Peers JPMorgan Chase JPM.N and Citigroup C.N also beat second-quarter profit estimates, helped by gains in their trading divisions.

"We continue to see solid consumer spending," and commercial loan growth, Bank of America CEO Brian Moynihan told analysts. "Our clients continue to see clarity with the changes in trade and tariffs, and now with the tax bill passing, we can see them start to understand the future and expect them to behave accordingly."

BofA's sales and trading revenue jumped 15% to $5.4 billion, notching a record for the second quarter and marking 13 consecutive quarters of year-over-year revenue growth.

In trading, equities revenue surged 10%, also hitting a record for the latest quarter, while fixed income, currencies, and commodities revenue jumped 19%.

"We're also benefiting right now from repositioning - a lot of geopolitical uncertainty, a lot of rate changes, elections last year leading to new policies this year, supply chain changes," Chief Financial Officer Alastair Borthwick told reporters.

BofA's profit was $7.1 billion, or 89 cents per share, for the three months ended June 30, compared with $6.9 billion, or 83 cents per share, a year earlier.

Wall Street had expected BofA to earn 86 cents a share in the quarter, according to estimates compiled by LSEG.

The lender set aside $1.6 billion in provisions for credit losses in the second quarter, compared with $1.5 billion a year earlier.

RECORD NII

Rate cuts by the Federal Reserve last year have helped reduce the cost of deposits for banks, allowing them to pocket more net interest income - the difference between what they earn on loans and pay on deposits.

BofA's NII rose 7% to a second-quarter record of $14.7 billion, thanks to fixed-rate asset repricing as well as deposit and loan growth.

On a fully-taxable equivalent basis, BofA reported record NII for any quarter, it said. The bank had previously forecast record NII for 2025, and Moynihan reiterated that target last month.

BofA continues to expect higher NII in the second half of 2025, Borthwick said. The bank reiterated that its interest income would reach $15.5 billion to $15.7 billion in the fourth quarter.

Average loans and leases rose 7% to $1.13 trillion in the quarter, growing broadly across its businesses.

BofA expects to see loan growth in mid-single-digit percentages in the second half, Borthwick said.

The bank also expects its expenses to flatten or decline in 2025.

Moynihan said the bank is working to keep headcount down. Bank of America's headcount rose marginally to 213,388 as of June 30.

INVESTMENT BANKING LAGS

BofA's investment banking fees slid 9% to $1.4 billion in the second quarter, lagging rivals. Investment banking fees rose 7% at JPMorgan, 13% at Citigroup and 9% at Wells Fargo WFC.N, which benefited from rebounding activity at the end of the quarter.

Dealmaking stalled in April over U.S. President Donald Trump's shifting trade policies, geopolitical tensions, and elevated interest rates. However, banking executives and analysts have expressed optimism about merger and acquisition opportunities and foresee more transactions in the second half.

BofA said it was encouraged by rebounding activity in May and June.

Last month, BofA projected investment banking fees to be roughly $1.2 billion, while trading revenue was expected to grow by mid- to high-single digits.

Bank of America said the bank and industry have been working on understanding demand for stablecoin, and investors can expect the company to move forward on it. The lender had earlier said it could launch stablecoins.

Stablecoins, a type of cryptocurrency designed to maintain a constant value, are commonly used by crypto traders to move funds between tokens.

Some analysts expressed concerns over the bank's long-term growth potential.

"We think BofA faces more risk in traditional lending to consumers and small businesses if the jobs market faces challenges ahead," said Kenneth Leon, director of equity research at CFRA Research.

"While we expect BofA to benefit from rising capital markets activity, we believe there are better-positioned peers to capitalize on investment banking," he added.