US bank shares jump on interest income and deals optimism, but outlook mixed
WASHINGTON (Reuters) -Big U.S. banks on Tuesday said higher interest rates had helped boost profits in the second quarter, causing shares to spike, but a pullback in consumer spending, slower loan growth and increased deposit costs may cloud the outlook for the sector.
Signs of a revival in investment banking, which has been in the doldrums as higher rates and economic uncertainty put a damper on deals and trading, also drove share gains, with Morgan Stanley (NYSE:MS) on Tuesday predicting an uptick in some areas of M&A.
Bank of America (NYSE:BAC) and Bank of New York Mellon (NYSE:BK) Corp, two of the country's largest lenders, earned a windfall from charging clients higher interest rates as the Federal Reserve raised borrowing costs to rein in stubborn inflation.
Bank of America's net interest income (NII), which measures the difference between what banks earn on loans and pay out on deposits, rose 14% to $14.2 billion in the second quarter, helping it to beat Wall Street estimates. The bank said it expects full year NII to be up about 8% at about $57 billion.
NII gains also helped drive a better-than-expected performance in BoA's global markets business, which was also boosted by a strong performance in bond, currency and commodities trading.
BNY Mellon also beat analyst estimates thanks to a 33% rise in net interest income to $1.1 billion, while PNC Financial Services Group (NYSE:PNC), a major regional lender, reported a 15% jump in NII to $3.51 billion for the second quarter.
The bank's full year NII outlook remains unchanged at 20% growth, Chief Financial Officer Dermot McDonogh told analysts.
That was in contrast to U.S. custodian bank State Street (NYSE:STT) warning on Friday of a further decline of 12-18% on
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