It has been about a month since the last earnings report for Bank of America (BAC). Shares have added about 1.5% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Bank of America due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Bank of America Q2 Earnings Beat on Robust Trading & NII Growth
Bank of America’s second-quarter 2025 earnings of 89 cents per share surpassed the Zacks Consensus Estimate of 86 cents. The bottom line compared favorably with earnings of 83 cents in the prior-year quarter.
Behind Headline Numbers
Bank of America recorded an improvement in trading numbers for the 13th straight quarter. Sales and trading revenues, excluding net DVA, grew 14.9% year over year to $5.38 billion. Fixed-income trading fees increased 18.6%, while equity trading income rose 9.6%. We had projected sales and trading revenues (excluding net DVA) of $4.92 billion.
This, along with higher net interest income, was the major revenue growth driver for Bank of America. NII grew on a year-over-year basis as fixed-rate asset repricing, and deposit and loan growth were partially offset by the impacts of lower interest rates.
However, the investment banking performance was subdued once again. IB fees (in the Global Banking division) of $767 million declined 8.1% year over year. Equity and debt underwriting income declined 13.3% and 4.7%, respectively. Advisory revenues were down 9.6%.
Provisions and non-interest expenses increased in the quarter on a year-over-year basis.
The company’s net income applicable to common shareholders grew 3.7% from the prior-year quarter to $6.83 billion. Our estimate for the metric was $6.76 billion.
Revenues Improve, Expenses Rise
Net revenues were $26.46 billion, which missed the Zacks Consensus Estimate of $26.59 billion. However, the top line increased 4.3% from the prior-year quarter.
NII (fully taxable-equivalent basis) grew 6.9% year over year to $14.82 billion. Our estimate for NII was $14.93 billion. Net interest yield expanded 1 basis point to 1.94%. We expected the metric to be 2.03%.
Non-interest income increased 1% from the prior-year quarter to $11.79 billion. This was driven by higher total fees and commissions. We had projected non-interest income of $11.78 billion.
Non-interest expenses were $17.18 billion, up 5.4% year over year. The rise was due to an increase in almost all cost components except for professional fees. Our estimate for non-interest expenses was $16.96 billion.
The efficiency ratio was 64.93%, up from 64.26% in the year-ago quarter. A rise in the efficiency ratio indicates a deterioration in profitability.
Credit Quality: A Mixed Bag
Provision for credit losses was $1.59 billion, up 5.6% from the prior-year quarter. We estimated the metric to be $1.54 billion.
Net charge-offs declined marginally year over year to $1.53 billion. As of June 30, 2025, non-performing loans and leases as a percentage of total loans were 0.52%, unchanged year over year.
Capital Position Strong
Book value per share as of June 30, 2025, was $37.13 compared with $34.39 a year ago. Tangible book value per share was $27.71, up from $25.37 a year ago.
At the end of June 2025, the common equity tier 1 capital ratio (advanced approach) was 13%, compared with 13.5% as of June 30, 2024.
Share Repurchase Update
In the reported quarter, the company repurchased shares worth $5.3 billion.
Guidance
Management expects NII (FTE basis) to grow sequentially to $15.5-$15.7 billion in the fourth quarter of 2025. Hence, NII is projected to rise 6-7% in 2025. The fixed rate asset repricing of assets and cash flow swaps is expected to benefit NII. Loan and deposit activity is anticipated to aid second-half NII growth.
Management expects loans to grow in the mid-single digit and deposits to grow in the low-single digit range in 2025.
Net interest yield is anticipated to reach 2.20%-2.30% in the next couple of years.
Management expects expense growth to be flattish in the back half of 2025.
Lower expenses along with the expectation of improved NII is anticipated to provide operating leverage in the second half of the year and an improved efficiency ratio.
Over time, the efficiency ratio is expected in the low-60% range.
In the near term, the total NCO ratio is not expected to change much (it was 55 bps in the second quarter) given the steadiness of consumer delinquencies, stability of C&I and the reductions in the company’s CRE office exposures.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a upward trend in estimates review.
VGM Scores
Currently, Bank of America has a subpar Growth Score of D, a score with the same score on the momentum front. Charting a somewhat similar path, the stock has a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions indicates a downward shift. Interestingly, Bank of America has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Bank of America Corporation (BAC): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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