Financial institution of America shares dip because the lender, pressured by low charges, misses on third-quarter income

Bank of America shares fell Wednesday after the lender posted third-quarter results that missed on revenue.

The bank said it generated $20.45 billion in total revenue, missing the $20.8 billion estimate of analysts surveyed by Refinitv. Profit in the quarter slumped 16% to $4.9 billion, or 51 cents a share, edging out the 49 cent estimate.

Shares of the firm dropped 5.3%.

Analysts have long considered Bank of America, with its vast deposit base, as the big bank most sensitive to swings in interest rates. The industry has been under pressure after the Federal Reserve said it will maintain a zero-rate policy for years in response to the coronavirus pandemic. That squeezes the spread that banks earn by taking in deposits and making loans.

The bank’s net interest income fell by 17% in the quarter from a year earlier to $10.2 billion. CEO Brian Moynihan has said that the key figure will likely bottom in the third quarter. The firm also missed on net interest margin, a related metric, which was 1.72%, 10 basis points below the estimate.

 While rivals JPMorgan Chase and Goldman Sachs each posted trading results that exceeded expectations by hundreds of millions of dollars, Bank of America didn’t fare as well. The firm’s bond trading desks produced $2.1 billion in revenue, under the $2.28 billion estimate of analysts surveyed by Refinitiv. The bank’s equities operations matched estimates at $1.2 billion.

The bank said it had a $1.4 billion provision for credit losses in the quarter, much less than the $5.1 billion in the previous period. Bank of America, the second-biggest U.S. lender by assets, has booked a total $9.8 billion provision for credit losses in the first two quarters of 2020.

JPMorgan and Citigroup each posted results that beat analysts’ expectations as they set aside less money for defaulting loans.

Shares of Bank of America have declined 29% this year through yesterday, a slightly better performance than the KBW Bank Index.

Here’s how the company did:

Earnings: 51 cents a share vs. the 49 cents estimate of analysts surveyed by Refinitiv.

Revenue: $20.45 billion, vs the $20.8 billion estimate.

Net Interest Margin: 1.72 %, vs the 1.82% estimate from FactSet.

Trading Revenue: Fixed Income of $2.1 billion, vs $2.28 billion estimate, Equities of $1.2 billion, vs $1.2 billion estimate

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