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Growth in Loans Drive BofA Revenue

The net income at Bank of America [1] rose 32 percent to $7.2 billion, driven by continuing strong operating leverage and asset quality, as well as benefit from tax reform, the bank said while announcing its earnings for the third quarter of 2018 on Monday. Its net revenue increased 4 percent to $22.8 billion, while its net interest income increased by $709 million to $11.9 billion on the back of higher interest rates as well as loan and deposit growth.

Bank of America, which reports its residential mortgage loan growth under other income reported that residential mortgage income decreased from $51 billion in the second quarter of 2018, and from $62 billion during the same period last year to $48 billion in the third quarter of 2018. Including its home equity loan that remained unchanged at $12 billion quarter-over-quarter, the bank's total mortgage income decreased from $77 billion in the third quarter of 2017 to $60 billion last quarter.

Despite this dip, its average loans and leases of $285 billion increased $16 billion or 6 percent, from the third quarter last year and were driven by growth in residential mortgage and credit cards. Of the $285 billion, the bank attributed $86 billion to residential mortgage loans.

Announcing the results, Brian Moynihan, Chairman, and CEO, Bank of America said that responsible growth backed by a solid U.S. economy and healthy U.S. consumer combined to deliver the highest quarterly pre-tax earnings in the bank's history. " This marks the 15th consecutive quarter of positive operating leverage, driven by continued growth in deposits, client balances in wealth management, solid loan growth, and disciplined expense management," Moynihan said.

Attributing the growth in consumer banking to the bank's digital initiatives, Moynihan said, "Our high-tech, high-touch approach continues to drive both client satisfaction and efficiencies. More than 3 million users have accessed Erica, the industry’s only AI virtual assistant, since its April rollout, and nearly a quarter of deposit transactions this quarter were performed via a mobile device."

Of those who have used the bank's digital challenge to apply for loans, Bank of America said that 20 percent of its total consumer mortgage applications had come from digital banking.

The bank said that its revenue from these sources increased $364 million during the quarter, "reflecting lower provision for representation and warranties as well as a small gain from the sale of non-core consumer real estate loans."

It indicated that a slower pace of portfolio improvement in non-core consumer real estate resulted in a decline of benefit from the provision for credit losses by $1 million to $95 million. "Non-interest expense decreased $168 million to $566 million reflecting lower non-core mortgage costs and litigation expense," the bank said.

To view, the bank's earnings click here [2].