A main driver for the underlying momentum is the up-tick in interest rates. Of course, higher interest rates are typically a positive factor for banks as the interest rate spread between deposits and loans widens. The improved interest rate climate was a driver for Bank of America's (BAC 29.13, +0.58, +2.04%) Q2 results, which it reported before the open this morning.
Specifically, EPS came in at $0.63, beating consensus by $0.06, for its largest EPS beat since 3Q16. On a growth basis, EPS climbed by an impressive 37% year/year, bolstered by tax reform, improved operating performance, and a 5% reduction in diluted share count as BAC has been actively buying back stock. Overall, the company returned $6.2 bln to shareholders during the quarter, through buybacks and dividends. Over the next year, BAC plans to return another $26 bln to shareholders through its approved capital allocation plan.
On the top-line, revenue decreased 1% to $22.6 bln, but that was also ahead of the $22.49 bln expectation. Also, in the year-ago period, revenue benefited from a $793 mln gain on the sale of its non-U.S. consumer card business. Excluding that one-time item, revenue would have been up by 3%.
Looking at some of its other key metrics, net interest income grew by 6%, due to higher interest rates, as well as from an acceleration in consumer activity. On that note, in its core Consumer Banking business, average deposits increased by 5% to $35 bln, while average loans increased by 7% to $19 bln. The combination of higher interest rates, a bump in loan growth, and solid operating leverage led to a 42% spike in net income for this segment to $852 mln.
Another area of strength for BAC was its Global Markets segment as revenue grew 7% to $4.2 bln and net income jumped by 34% to $1.1 bln. Here, the strong results were driven by a $33 boost in average total assets, helping to generate a 7% bump in trading revenue.
Overall, BAC's solid results illustrate that business conditions continue to improve and that there is steady momentum underlying it. Along with its stock buybacks and dividends, BAC should be poised to generate solid, positive returns for investors going forward, assuming the broader markets cooperate.