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Bank Of America Q3 Profit Surges On Asset Quality, Lower Tax Rate

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Bank of America (BAC) reported that its third-quarter earnings per share was up 43% year-over-year to $0.66. On average, 24 analysts polled by Thomson Reuters expected the company to report profit per share of $0.62 for the quarter. Analysts' estimates typically exclude special items. Net income to shareholders increased to $6.7 billion from $5.0 billion, previous year, driven by continuing strong operating leverage and asset quality, as well as the benefit of tax reform. Pretax income was up 18% to $9.0 billion.

On a fully taxable-equivalent (FTE) basis, total revenue, net of interest expense, was $22.93 billion compared to $22.08 billion, last year. Analysts expected revenue of $22.7 billion for the quarter.

Third-quarter revenue, net of interest expense, increased 4% to $22.78 billion. Net interest income increased 6%, to $11.9 billion, reflecting benefits from higher interest rates, as well as loan and deposit growth; net interest yield of 2.42%, up 6 bps. Non-interest income increased 2%, to $10.9 billion.

Bank of America said overall credit quality remained strong across both the consumer and commercial portfolios during the quarter. The provision for credit losses decreased $118 million to $716 million. Nonperforming assets declined $1.4 billion to $5.4 billion, driven by improvements in both consumer and commercial portfolios. Average loan and lease balances in business segments rose $29 billion, or 3%, to $871 billion. Average deposit balances rose $45 billion, or 4%, to $1.3 trillion.

"Our earnings growth year-over-year was driven by operating leverage, asset quality, and a lower tax rate. For 12 straight quarters, our average deposits have grown year-over year by more than $40 billion, reflecting the value to customers of our deposit capabilities and franchise - and driving both growth of net interest income and improvement in net interest yield," said Paul Donofrio, CFO.

For Consumer Banking segment, third-quarter net income rose 49% to $3.1 billion. Revenue increased 7%, to $9.4 billion. Deposits were up 4% to $688 billion. Loans were up 6% to $285 billion.

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