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For the eighth consecutive quarter, Bank of America (BAC) exceeded EPS expectations in Q2, but like most of its banking peers, high interest rates cut into its net interest income (NII) as higher deposit costs offset an increase in asset yields. Furthermore, those high interest rates weighed on demand for loans, including mortgages and auto loans, causing revenue to edge higher by less than 1%. As such, the company's NII and EPS fell by 3% and 6%, respectively.

• In BAC's Consumer Banking segment, stiff competition for deposits amid a high interest rate environment caused deposits to slip by 6% as consumers sought out higher yielding products. In turn, BAC had less capital to lend out, although average loans and leases still grew by 2% to $312 bln due to higher asset yields.
• From an asset quality standpoint, BAC is still on solid footing as net charge-offs remained relatively flat on a qtr/qtr basis at $1.5 bln.
• The Global Markets unit was a standout, which saw revenue increase by 12% to $5.5 bln. Equities trading was strong with revenue jumping by 20% to $1.9 bln, while FICC growth was much more modest, up just 3% due to a weak trading environment in FX and interest rate products.
• Another positive was the investment banking business. Thanks to the ongoing recovery in the IPO market, total investment banking fees shot higher by 29% to $1.6 billion, placing BAC in the #3 spot for investment banking fees across the industry.
• Lastly, the strong stock market and healthy capital inflows helped BAC achieve record client balances of more than $4.0 trillion, up by 10%, in its Global Wealth and Investment Management segment.

Overall, there were few surprises given that most of BAC's largest competitors had already reported earnings. However, the stock is trading with some nice gains in the wake of the earnings report, which is likely tied to its Q4 NII outlook of $14.5 bln, reflecting a 4% yr/yr increase, and its expectation for net charge-offs to be lower in 2H24 compared to 1H24.