Bank of America profit beats estimates

NEW YORK, July 17 (Reuters): Bank of America Corp beat estimates for quarterly profit on Wednesday, as the loan book of the country's second-largest lender benefited from a healthy economy.

Consumer banking has held up for the big Wall Street banks that have reported second-quarter results this week, cushioning a blow from weakness in trading and advisory businesses.

But warning signs also emerged with JPMorgan, Citigroup and Well Fargo reporting a dip in margins, stoking fears that interest rate cuts could further pressure profit by narrowing the spread between what banks charge on loans and pay on deposits.

Bank of America, however, bucked that trend and reported a 3-basis-point increase on the year in its interest margin to 2.44 per cent for the second quarter, though the metric fell seven points from the first quarter.

Chief Financial Officer Paul Donofrio said on a call with reporters the sequential decline was due to lower long-term interest rates.

"When long-term interest rates fall, we see more people pay off their mortgages and that translates into more mortgage-backed securities being redeemed and that forces us to write off some premiums," he said. "I don't think you can extrapolate that into the future because long-term rates have stabilised at this point."

The lender is the most sensitive of the big U.S. banks to interest rate changes because of its large deposit stock and rate-sensitive mortgage securities.