Falling interest rates drag on Bank of America and Wells Fargo profits
Falling interest rates took a painful toll on third-quarter profits at Bank of America and Wells Fargo, continuing to compress lending margins, overshadowing falling credit costs and improved results from the banks’ fee-based businesses.
On Wednesday, BofA and Wells reported third-quarter net profits of $4.8bn and $2bn, respectively — $1.3bn and $4.4bn higher than in the second quarter. Much of the improvement was down to lower provisions for bad loans, as the outlook for the American economy stabilises.
Wells Fargo’s mortgage business had a bumper quarter behind a wave of home refinancings, and Bank of America saw fees rise in its credit card business. Investment banking fees were strong at both banks, reflecting a strong environment for public offerings and mergers.
None of this was enough to offset damage done by falling interest rates, however. Net interest income (total revenue from interest-bearing assets, less interest paid for financing) fell 7