SKN | Bank of America Faces Q3 Earnings Test as Net Interest Income Growth Meets Credit Risks

Key Takeaways:

• Bank of America is expected to report third-quarter revenue of $30.62 billion, up 9% year over year, with earnings forecast at $1.12 per share, representing 5.7% growth.
• Tax-equivalent net interest income is projected to increase 7.5% to $16.55 billion, while investment banking income is expected to decline 15.3% to $1.71 billion.
• Higher projected non-performing loans, rising credit-loss provisions and elevated operating expenses could limit the benefits of stronger lending and trading activity.

Bank of America Corporation (NYSE: BAC) is scheduled to report third-quarter 2026 results before the market opens on October 14. After a strong first half supported by trading and investment banking, the bank faces a more mixed earnings environment, with higher net interest income expected to offset weaker investment banking activity and mounting credit-quality concerns.

Net Interest Income Provides the Primary Earnings Support

The Zacks Consensus Estimate places third-quarter revenue at $30.62 billion, representing 9% year-over-year growth. The earnings estimate has recently moved lower to $1.12 per share, although the figure still implies a 5.7% increase from the prior-year quarter. Bank of America has exceeded earnings expectations in each of the past four quarters, with an average surprise of 8.2%.

Tax-equivalent net interest income (NII) is forecast to reach $16.55 billion, an increase of 7.5% year over year. Steady loan demand and stabilizing deposit and funding costs are expected to support this performance. Commercial and industrial lending, consumer credit and real estate lending remained relatively resilient during the first two months of the quarter, although lending momentum is expected to have moderated from the first half.

The Federal Reserve’s September rate increase of 25 basis points to a target range of 3.75%–4.00% came late in the quarter and is therefore unlikely to have materially affected Bank of America’s third-quarter interest income or margins. The earnings contribution will depend more heavily on lending volumes and the bank’s ability to manage funding costs.

Trading Resilience Contrasts With Investment Banking Weakness

Market volatility provided a supportive backdrop for trading activity during the quarter. Shifting expectations surrounding artificial intelligence, geopolitical tensions, persistent inflation and uncertainty over monetary policy contributed to activity across equities, commodities, fixed income and foreign exchange.

The Zacks Consensus Estimate for market-making and similar activities stands at $3.33 billion, up 3.9% year over year. Management, however, expects third-quarter sales and trading revenue to remain relatively flat, creating a distinction between analyst expectations and the company’s own outlook.

Investment banking faces greater pressure. Global mergers and acquisitions activity moderated as higher interest rates and inflation complicated deal valuations and negotiations. Although initial public offering proceeds reached a five-year high, supported by major technology and artificial intelligence listings, the number of IPOs declined year over year. Equity and debt issuance also lost momentum after a strong first half.

Against this backdrop, Bank of America’s investment banking income is expected to fall 15.3% to $1.71 billion. Healthy IPO proceeds may provide some support to underwriting fees, but weaker issuance and subdued M&A activity are likely to constrain overall performance.

Expenses and Credit Quality Remain Key Risks

Bank of America expects third-quarter expenses of $18.6 billion. Spending on financial-center expansion, digital transformation and upgrades to existing locations is expected to keep non-interest expenses elevated. Investors will need to determine whether projected revenue growth is sufficient to absorb these costs without weakening operating efficiency.

Credit quality presents another potential pressure point. Persistent inflation, elevated interest rates, volatile oil prices and geopolitical uncertainty are identified as risks that could increase provisions for credit losses. The Zacks Consensus Estimate for non-performing loans and leases stands at $6.46 billion, implying a 20.8% increase from the prior-year quarter.

What Investors Should Watch

Bank of America’s October 14 report will test whether growth in net interest income and trading can offset weaker investment banking revenue, higher expenses and potential deterioration in credit quality. Revenue growth alone may not determine the market’s response; the sustainability of earnings and management’s assessment of loan performance, funding costs and credit provisions will also matter.

For a confidential discussion regarding your cross-border banking structure, contact our senior advisory team.