This page has been archived and commenting is disabled.

Bank of America Net Interest Margin Drops To All Time Low, FICC Revenues Tumble 11%

Tyler Durden's picture




 

While yesterday's JPM results missed from the top to the bottom, coupled with a surprising and aggressive deleveraging of the bank's balance sheet which has shrunk by over $150 billion in 2015 mostly on the back of a decline in deposits, Bank of America reported numbers which were largely the opposite when it printed a modest beat on both the top line with $20.9 billion in revenues (adjusted sales of $20.6Bn vs Exp. $20.5Bn), down $500 million from a year ago, and the bottom line: generating $0.35 in adjusted earnings in the quarter, 2 cents better than the $0.33 consensus estimate.

As shown in the chart above, the company's official EPS  was $0.37 but this contained the following adjustments:

  • ($0.03) per share after-tax from negative market-related NII adjustments 1 ($0.6B pre-tax)
  • $0.02 per share after-tax from positive net debit valuation adjustments ($0.3B pre-tax)
  • $0.02 per share after-tax net positive impact from gain on sales of consumer real estate loans ($0.4B pre-tax), chargefor UK payment protection insurance ($0.3B pre-tax), and income tax benefits related to certain non-U.S. subsidiaryrestructurings

As to where that all important 2 "beating" cents came from, why the usual place of course:

"The net reserve release was $126 million in the third quarter of 2015, compared to a net reserve release of $407 million in the third quarter of 2014."

Which is odd considering this takes place in a quarter when everyone else (coughjefferiescough) is provisioning for deep credit losses.

The reason for the improvement on the expense side was cost-control, with total noninterest expenses flat at $12.7 billion, while LAS and litigation were a modest $1.1 billion. Also worth noting: BofA continue to layoff workers, which dropped from 230K a year ago to 215K in Q3, down 2K from the previous quarter. Goldman Sachs continues to be the only bank in the US which is hiring bankers.

In any event, the number was "good enough" because as a reminder, it was a year ago that BofA posted a surprising loss on the back of massive legal charges. And as we wroted previously, due to the swing from a loss to a profit, far more than AAPL, BofA would be the single biggest earnings swing factor in Q3 not only for the financial sector but also for the S&P as BofA alone will contribute to about 1.4% of the Y/Y change in S&P earnings!

 

Furthermore, as noted above, while JPM has continued deleveraging its balance sheet even as it adds loans, BofA continues the old regime of adding deposits, while seeing its total loan book stay largely flat (and decline Y/Y).

 

Continuing the comparisons with JPM, and even more troubling for BofA, was that while JPM managed to continue growing its Net Interest Margin even if at a snail's pace, BofA's decline once again, and in Q3 saw its smallest reported NIM of just 2.10%, tumbling from 2.37% the quarter before. This was also below the expected NIM 2.2%, and resulted in just $9.7 billion in net interest income.

Adding insult to NIM injury, was the widely expected plunge in market revenue, with FICC revenues sliding 11% "due to declines in credit-related businesses, partially offset by improvement in rates products." Just like with JPM, modestly offsetting this was equities revenue which improved $0.1B, or 12%, from 3Q14, "led by strong performance in derivatives, reflecting favorable market conditions."

And while BofA was not kind enough to provide an outlook for Q4 unlike JPM, which explicitly warned that Wall Street is overly optimistic on its profit forecasts, we doubt the outcome will be any different: continued layoffs, continued slowdown in sales and trading, and a continued deterioration in the NIM as long as the Fed is trapped and unable to hike rates.

 

 

 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Wed, 10/14/2015 - 07:49 | 6666248 Oldwood
Oldwood's picture

just let us know how much you need. We'll put a check in the mail.

Wed, 10/14/2015 - 08:22 | 6666338 Arnold
Arnold's picture

Once , just once, I would like to loose a billion dollars.

On a daily basis, I know it would kill me though.

Wed, 10/14/2015 - 07:49 | 6666249 yogibear
yogibear's picture

Federal Reserve is discouraging deposits. Wants everyone to throw their deposits into the stock market.

Where Wall Street can siphon the money and later pay back Fed officials the favor, like Bernanke, with jobs making insane amounts of money.

Wed, 10/14/2015 - 07:50 | 6666250 MFL8240
MFL8240's picture

Why sure, we believe this!!  We all know bankers don't lie!

Wed, 10/14/2015 - 07:54 | 6666264 Trips Trading
Trips Trading's picture

Friday OCT 16 and Monday OCT 19 are days where you should pay special attention to a High or Low.

Last TripsTrading Cycle Model was OCT 13, spot on.

http://tripstrading.com/2015/10/13/sp500-time-to-panic/

http://tripstrading.com/2015/10/09/sp500-how-cycles-take-their-time/

http://tripstrading.com/2015/10/10/sp500-suffering-from-low-energy/

Wed, 10/14/2015 - 07:55 | 6666270 Last of the Mid...
Last of the Middle Class's picture

Bank of America financial results, that's like United screen door's submarine sales report. What a joke. Just call up ole yeller and get some moar fiat.

Wed, 10/14/2015 - 08:12 | 6666301 ajkreider
ajkreider's picture

Loans are up for JPM, BOA and WFC.

Not. Flashing. Recession.

Wed, 10/14/2015 - 08:29 | 6666351 29.5 hours
29.5 hours's picture

.
.
.
Tyler is negative bias. CNBC headlines the Bank of America figures as a massive beat. Who to believe?

"Bank of America earnings, revenues beat expectations"

Expectations must have been low.

Wed, 10/14/2015 - 08:32 | 6666377 rsnoble
rsnoble's picture

Declining deposits??? The FEd was just crying about people saving too much.

Wed, 10/14/2015 - 08:38 | 6666396 Arnold
Arnold's picture

Naw, the complaint department says we aren't spending 140 % of our declining revenues.

http://www.ebay.com/itm/Take-A-Number-Complaint-Department-Replica-Grena...

Wed, 10/14/2015 - 10:01 | 6666688 Dr_Snooz
Dr_Snooz's picture

215,000 workers? Wow! Talk about bloated and inefficient. The DOJ could do them a favor by busting them up. Won't happen, of course. They'd rather dismember themselves by cutting bits off slowly, over time.

Do NOT follow this link or you will be banned from the site!