(AOF) – Bank of America’s profits came in below expectations. In the second quarter, net income fell to $6.2 billion, or 73 cents per share, from $9.2 billion and $1.03 per share, respectively, a year earlier. The FactSet consensus was 75 cents. Net banking income increased by 5.6% to 22.7 billion dollars, coming out slightly below market forecasts. It was, however, buoyed by the 22% jump in net interest income to $22.7 billion thanks to higher rates and loan growth.
Its accounts were penalized by $553 million in provisions for bad debts, an increase of $2.1 billion. The bank had recorded reversals of provisions to the tune of 2.2 billion dollars a year earlier.
Bank of America also suffered from a 47% drop to $1.1 billion in investment banking fees.
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The negative effects of rising interest rates
The rise in interest rates normally causes an increase in bank income through the loans granted. In Europe, according to a survey conducted by S&P among 85 banking establishments, the sector expects on average an 18% increase in its net interest income. However, this new inflationary context also has undesirable effects, in particular an increase in refinancing costs. It is also accompanied by the fear of a new recession, which would then affect all the bank’s businesses, ranging from loans to asset management, whose income is correlated to market valuations. Reassuring element: the banks of the euro zone are sufficiently solid to face a deterioration of their environment.