NEW YORK (AP) — Consumer banking giant Bank of America reported a 10 percent rise in second-quarter profits on Tuesday as gains from higher interest rates were more than enough to offset a drop in trading revenue.
The Charlotte, North Carolina-based bank said it earned $5.27 billion, or 49 cents per share, compared with $4.78 billion, or 43 cents per share, in the same period a year earlier. The results beat analysts' forecasts of 43 cents a share.
Like its competitors, Bank of America benefited from rising interest rates. The Federal Reserve has raised interest rates three times since December, which has allowed banks like BofA to charge higher interest rates to borrowers when they take out loans.
Because of its large consumer banking division, Bank of America's fortunes, as the nation's second-largest bank by assets, are often more directly tied into interest rates than its rivals JPMorgan Chase, Citigroup and Goldman Sachs, who have much larger trading divisions and are less exposed to short-term interest rates. Bank of America's net interest income increased 9 percent in the quarter compared to a year ago to $10.99 billion.
"Against modest economic growth ... we had one of the strongest quarters in our history," said BofA CEO Brian Moynihan in a statement.
BofA did experience some difficulty on its trading desks this quarter, however. The bank's trading division reported profits of $830 million in the quarter, down 25 percent from a year earlier, largely due to a slide in trading revenue. Other major banks have said that last quarter's quieter market conditions kept traders on the sidelines, which in turn kept a lid on bank trading revenues. The pain was particularly felt in BofA's fixed-income trading division, where revenue fall 14 percent.
Ken Sweet covers banks and consumer financial issues for The Associated Press. Follow him on Twitter at @kensweet.