A Bank of America logo is seen on the entrance to a Bank of America financial center in New York City, U.S., July 11, 2023. REUTERS/Brendan McDermid

By Pritam Biswas, Saeed Azhar and Prakhar Srivastava

(Reuters) -Bank of America beat Wall Street estimates for profit, benefiting from bumper third-quarter investment banking, and upgraded its outlook for net interest income, sending its shares up 5% in early trading.

The second-largest U.S. bank sees fourth-quarter NII between $15.6 billion and $15.7 billion, up about 8% from a year earlier.

The Federal Reserve's 25-basis-point cut in September, along with other economic factors, is expected to stoke demand from borrowers.

"Unemployment still remains at a pretty low level, wage growth is pretty good overall, home prices remain in a good place, and obviously the stock market's in a good place," Chief Financial Officer Alastair Borthwick said on a call with journalists.

He also said that these conditions probably accounted for the "performance in consumer and in commercial."

The bank and its biggest rivals also gained from renewed confidence among corporations to carry out large mergers and acquisitions.

Investment banking fees at BofA rose 43% to $2 billion from a year earlier, compared with executives' earlier forecast for a 10% to 15% increase.

INTEREST INCOME BOOST

Net interest income — or the difference between what the bank earns on loans and pays out on deposits — rose 9% to $15.2 billion in the quarter from a year earlier.

BofA had previously said it expects record net interest income in 2025.

"Strong loan and deposit growth, coupled with effective balance sheet positioning, resulted in record net interest income," CEO Brian Moynihan said in a statement.

BofA's stock, up 14% so far in 2025 as of last close, has, however, underperformed all of its peers as well as the KBW Bank Index. It was last up 5.3%.

"This was just a well-rounded beat," said David Wagner, head of equities and portfolio manager at Aptus Capital Advisors. "The stock's performance is catching up to some of the other larger-cap peers from a year-to-date perspective... I view Brian Moynihan and BAC as the north star for recognizing consumer trends before other banks."

The bank also lowered its provisions for credit losses in the third quarter to $1.3 billion, from $1.5 billion a year earlier and $1.6 billion in the previous quarter, echoing a similar move by Wells Fargo on Tuesday.

DEALMAKING REBOUNDS

Globally, megadeals reached $1.26 trillion during the reported quarter, a 40% jump from the same period last year, marking the second-highest third-quarter total on record, according to Dealogic data.

Overall global dealmaking topped $3 trillion in the first nine months of 2025, reaching the highest level since the pandemic peak in 2021, according to Mergermarket data.

Peers JPMorgan Chase and Citigroup also beat estimates for third-quarter profit, helped by strength in their investment banking businesses.

"With deal activity picking up and monetary policies coming into focus, banks are keeping on an even keel as they navigate through economic volatility," KPMG U.S. Banking Sector Leader Peter Torrente said, adding that continuous assessment of rate trajectory and consumer financial health "remains crucial as banks head into the final months of the year."

Bank of America on Wednesday reported a net income of $8.5 billion, or $1.06 per share, in the three months ended September 30. That compares with $6.9 billion, or 81 cents per share, a year earlier.

The Street was expecting a profit of 95 cents per share, according to estimates compiled by LSEG.

FIRST BRANDS

Bank of America is among the group of lenders to bankrupt auto parts maker First Brands, but the loans are backed by strong collateral, Borthwick said on Wednesday.

"We're in the syndicated loan for the First Brands deal," Borthwick told reporters in a call. "That is an asset-backed loan. So when we think about prudent risk management, we're thinking about the borrower, we're thinking about the collateral, and here, we're secured."

During the analysts' call, he said any risk is taken care of through the reserve methodology this quarter, therefore it is reflected in the bank's results.

The reserve methodology allows banks to set aside funds to cover future obligations or risks.

(Reporting by Pritam Biswas in Bengaluru and Saeed Azhar in New York, editing by Lananh Nguyen and Shinjini Ganguli)