NEW YORK: Bank of America’s third-quarter profit dropped as it paid more to customers to hold onto their deposits but the earnings beat estimates, propelled by stronger investment banking and trading.

Investment banking fees jumped 18 percent compared with a year ago to $1.4 billion as confidence among clients improved, spurring them to issue more debt and equity. “Our customers’ deposit balances and asset quality are healthy, and we believe we have good opportunities to grow,” Chief Financial Officer Alastair Borthwick told journalists. Regarding investment banking, Borthwick said, “We feel pretty good looking forward. We’ve got a good pipeline.

CEO Brian Moynihan called the earnings “solid,” citing growth in investment banking, asset management fees and sales and trading revenue.

Meanwhile, Citigroup posted a smaller-than-expected drop in profit for the third quarter thanks to gains in investment banking, particularly in debt underwriting. The third-largest US lender’s dealmakers joined rivals at JPMorgan Chase and Wells Fargo in benefiting from a rebound in capital markets as corporate clients issued more debt and equity. Investment banking was a bright spot for the second straight quarter, as revenue jumped 31 percent to $934 million. Wall Street executives are optimistic that the Federal Reserve’s interest-rate cut last month will pave the way for more deals and initial public offerings. “You’ve heard me talk for a number of quarters about the pipeline and announced deal volume being strong,” Chief Financial Officer Mark Mason said in a call with reporters. The bank has “always been strong in debt capital markets” and continues to benefit from investment grade issuance as clients look to get back into the market, he said.

Citi’s total operating expenses declined 2 percent in the third quarter. The bank increased its total allowance for potential credit losses by about $1.9 billion, driving down net income to $3.2 billion, or $1.51 per share, from $3.5 billion, or $1.63 per share, a year earlier. It still handily beat analysts’ average expectations of $1.31 per share, according to estimates compiled by LSEG. 

Lower-income consumers are facing pressures, and middle-income consumers are being more selective with their spending, Mason said. The highest-earning consumers are driving most of the spending growth, focused on experiences and essentials, he added. For BofA, its underwriting income jumped 39.7 percent in the quarter, while syndication fees rose 31 percent. Moynihan said last month that he expected investment banking revenue to be broadly steady. Sales and trading revenue jumped 12 percent to $4.9 billion, the 10th consecutive quarter of year-on-year growth, as equities climbed 18 percent while fixed income, currencies and commodities rose 8 percent. -- Reuters