Bank of America Corp. (BAC - Get Report) said third-quarter profit jumped as President Donald Trump's tax cuts boosted its bottom line, while the economic stimulus from the legislation helped to boost loan and deposit growth.
Net income rose 32% from a year earlier to $7.2 billion, the Charlotte-based bank said Monday, Oct. 15, in a statement. Earnings per share were 66 cents, beating the average analyst estimate of 62 cents in a FactSet survey.
The tax windfall also padded profits for rival banks JPMorgan Chase & Co. (JPM - Get Report) Citigroup Inc. (C - Get Report) and Wells Fargo & Co. (WFC - Get Report) in their earnings reports last week. Although Trump's tax cuts, which took effect last December, have drastically widened the U.S. government's budget deficit, ballooning the national debt past $21.5 trillion, the legislation has enriched banks' shareholders and employees.
At Bank of America, income taxes totaled $1.83 billion in the third quarter, or $360 million less than it paid in the third quarter of 2017.
The tax cuts also have stimulated growth in household spending, producing what Trump administration officials have described as a "hot economic boom."
U.S. banks have profited from the trend through faster loan and deposit growth, as well as from higher interest rates that have increased the rates borrowers pay on loans.
Revenue rose 4% to $22.8 billion, while expenses fell by 2% to $13.1 billion, the bank said. Pre-tax income rose by 18%.
"Responsible growth, backed by a solid U.S. economy and a healthy U.S. consumer, combined to deliver the highest quarterly pre-tax earnings in our company's history," CEO Brian Moynihan said in the statement.
Bank of America's profit growth came even as it fared worse than rivals in the big Wall Street moneymaker of bond- and stock-trading.
Revenue from bonds, currencies and commodities tumbled by 7.9% to $1.98 billion, the bank said, due to slower client activity in government bonds and related trading contracts, as well as from a weaker environment in municipal bonds.
Stock-department revenue increased by 1.3% to $990 million, driven by increased demand for financing from trading clients.
On a combined basis, the trading fees fell by 5% to $2.97 billion, a bigger decline than at JPMorgan, which saw revenue from the business slip by 1.9% to $4.44 billion. Citigroup's overall trading revenue rose by 7.3% to $3.99 billion.