Bank of America saw profits surge 10% in the latest quarter, but an interest rate cut could crimp earnings in coming months (EVA HAMBACH)

New York (AFP) – Bank of America scored record profits in the second quarter, as strong consumer banking results offset a decline in earnings from trading worldwide.

The second-biggest US bank by assets, Bank of America reported Wednesday that profits jumped 10 percent from last year to $7.1 billion, setting a new record.

Revenues rose 2.4 percent to $23.1 billion. 

The bank notched sizeable increases in loans and deposits and offered an upbeat appraisal of the US economy.

“Our view of the economy reflects the activity by the one-in-two American households we serve, which points to a steadily growing economy,” chief executive Bryan Moynihan said.

“We see solid consumer activity across the board, with spending by Bank of America consumers up five percent this quarter over the second quarter of last year.”

The bank posted higher profits in its consumer segments thanks to a jump in net interest income, the difference between the interest rates it charges for loans and the rate it pays for deposits.

However, profits in this business are now under pressure due to the shift in Federal Reserve monetary policy. 

The Fed raised benchmark lending rates four times last year but markets believe it is virtually certain to backtrack and make a cut later this month.

The bank’s chief financial officer, Paul Donofrio, told an analyst conference call that Bank of America now expects net interest income to grow about two percent overall in 2019 from last year’s level, down from the previous forecast for three percent growth.

If the Fed goes through with expectations for two rate cuts in 2019 and another in 2020, net interest income could be shaved by another one percent, Donofrio said.

On an earlier call with reporters, Donofrio cited evolving monetary policy as one factor that led to lower trading volumes, which weighed on profits in global markets.

“There was just less activity,” he said. “You probably just need to see a little more confidence about global growth. It would help to clear up some of the concerns people have about trade.”

Shares of Bank of America rose 0.6 percent to $29.15 in early trading.

Disclaimer: Validity of the above story is for 7 Days from original date of publishing. Source: AFP.