Bank of America Corp posted a nearly 34% drop in second-quarter profit on Monday, hit by a slump in investment banking revenue as dealmaking activity was at a fraction of last year's record levels.
Wall Street investment bankers, who were neck-deep in deals last year, have seen activity slump in the first half of 2022 amid volatility in capital markets, geopolitical tensions and a risk-off sentiment that has swept across markets globally.
Bank of America's shares, which have fallen nearly 28% so far this year, were down 1.2% in premarket trading.
With stock market listings on ice and companies slamming the brakes on dealmaking, Bank of America's investment banking fees fell 47% to $1.1 billion in the reported quarter.
Revenue in the quarter, net of interest expense, increased 6% to $22.7 billion.
The U.S. Federal Reserve has been hiking interest rates rapidly, in line with its commitment to tame decades-high inflation. Though recession risks persist, the move for now has translated into higher profits for banks, which typically thrive in a high interest rate environment.
Bank of America's net interest income, a metric that measures the difference between the interest earned on loans and the amount paid out on deposits, jumped 22%, or $2.2 billion, to $12.4 billion.
Because of the composition of its balance sheet, BofA is the most sensitive among large U.S. banks to changes in interest rates.
"Our U.S. consumer clients remained resilient with continued strong deposit balances and spending levels," Chief Executive Officer Brian Moynihan said.
Combined credit and debit card spend for the bank rose 11% to $220.5 billion over the immediately preceding quarter. That figure was also up 10% year over year.
Total loans and leases, excluding those from the government's Paycheck Protection Program, grew 14% year-over-year. That figure was also up 4% from the immediately preceding quarter.
Bank of America recorded average deposits of more than $1 trillion, up 10% from a year earlier.
Profit applicable to common shareholders fell to $5.93 billion, or 73 cents per share, for the quarter ended June 30, from $8.96 billion, or $1.03 per share, a year earlier.
(Reporting by Manya Saini and Niket Nishant in Bengaluru and Elizabeth Dilts Marshall in New York; Editing by Shounak Dasgupta)