Bank of America Corp (NYSE:BAC) reported 2Q EPS of $0.46, coming in above Nomura’s estimate (and cons.) of $0.43. Adjusting for the sale of the UK Card business (+$0.01), core EPS was closer to ~$0.45.
Versus Nomura’s forecast, the beat was driven by stronger fee income in Global Banking (+$0.01) and lower provision (+$0.01). While NII did miss Nomura’s forecast largely on weaker Global Markets NII (a pattern evident at peers as well), this was offset by slightly better efficiency with expenses ($13.7bn) in line with Nomura’s estimate on higher revenue (though Nomura notes expenses came in ~$200mn above cons.). Capital build was also quite impressive (+50bps QoQ) helped by a $34bn reduction in RWA.
Bottom Line: Despite core beat and recent share weakness (-1.0% QTD, vs. S&P Fins. +0.8%), Nomura anticipates modest underperformance off the back of yesterdayy's result as slight NII miss and elevated NII bar for 3Q ($11.6bn, vs. $11.2bn in 2Q) could dampen positive revisions despite fee income strength / favorable credit trends. This said, Nomura remains encouraged by fee income resiliency, favorable credit trends, and strong capital build, and view longterm risk / reward as compelling with shares trading at < 1.4x TBV.