Bank of America decided not to be modest. The bank announced a $40 billion share buyback, which immediately reflected in the stock prices — on Wednesday, towards the end of trading in New York, shares rose by 1%.
The board of directors approved a new program that will start immediately after August 1, as soon as the previous buyback is completed. Last year's plan was for $25 billion, but by the end of June, only $9.1 billion remained.
Now the old scheme has been completely canceled and replaced with a more powerful one. The bank itself says this will provide 'more flexibility in capital allocation.' What does this actually mean? They have more money than needed, and they decided to invest it in their own shares.
The official version: the buyback will help maintain a balance between supporting the economy, investing in the future, and providing returns to shareholders, without weakening financial stability. It all sounds nice, but the essence is simple: the bank has excellent profits and is returning money to shareholders.
Earnings exceeded expectations
Simultaneously with the announcement of the buyback, Bank of America presented its results for the second quarter, and they turned out to be mixed. Earnings were 89 cents per share, while LSEG analysts had forecasted 86 cents. However, revenue amounted to $26.61 billion against expectations of $26.72 billion. Interest income was weaker than forecasts: $14.82 billion versus $14.89 billion.
Net interest income is the difference between what the bank earns on loans and investments and what it pays to depositors. The figure increased by 7% compared to last year, but the decline in rates has slowed the pace. Nevertheless, net income rose to $7.12 billion, which is 3% more than a year ago.
CEO Brian Moynihan attempted to shift the focus to long-term trends. According to him, consumers remain resilient — spending actively, and the quality of assets remains high. Additionally, there has been an increase in demand from corporate borrowers.
Moynihan also noted that NII has been growing for the fourth consecutive quarter, thanks to a steady inflow of deposits and an expansion of the loan portfolio. Simply put, the core business is functioning as it should, even if not all numbers pleased Wall Street.
Buybacks strengthen the positions of the largest banks
Despite weak revenue overall, individual divisions pulled the quarter through. Bond trading generated $3.25 billion — better than the forecast of $3.14 billion. Equities fell slightly short: $2.13 billion against higher expectations.
However, the investment banking division looked weaker. Fees for the quarter amounted to $1.4 billion. This is above the StreetAccount forecast of $1.27 billion, but compared to last year, the figure has declined by 9%.
Against the backdrop of the buyback, Bank of America shares have already gained about 10% since the beginning of 2025, and the new buyback adds fuel to the fire. Moreover, not only BofA has decided to spend money.
JPMorgan Chase approved its own buyback of $50 billion, while Morgan Stanley extended its long-term program with a limit of up to $20 billion. All these banks recently passed the Fed's stress test and are now actively demonstrating that they are in good shape capital-wise.
