Adds commentary from executives and analysts throughout, updates shares

By Pritam Biswas and Saeed Azhar

July 14 (Reuters) - Bank of America BAC.N exceeded Wall Street estimates for second-quarter profit on Tuesday, as global market chaos fueled record trading, while a corporate dealmaking surge spurred investment banking.

The bank also expects full-year 2026 net interest income to grow at the upper end of its previously forecast range of 6% to 8%, finance chief Alastair Borthwick said.

Investors remained cautious and reshuffled portfolios amid volatile markets, as U.S.-Iran tensions fueled concerns over global crude supplies, drove oil prices higher and added to uncertainty around interest rates and persistent inflation.

Large investment banks tend to benefit from volatile markets, as their trading desks generate higher revenue from increased client activity.

Bank of America's second-quarter sales and trading revenue jumped 33% to a record $7.1 billion from $5.3 billion a year earlier. Chief Executive Officer Brian Moynihan had earlier said that the bank was expecting a 15% rise.

Equities revenue climbed 70% to $3.6 billion.

"Overall, the U.S. economy has proved more durable than expected, supported by the strong consumer, ongoing AI-driven investments across the board and easing energy costs, though inflation and tighter monetary policy remain key risks," said Moynihan in a post-earnings conference call.

The bank reported a net income of $9.1 billion, or $1.21 per share, in the three months ended June 30, compared with $7.2 billion, or 90 cents per share, a year earlier.

Analysts were expecting a profit of $1.13 per share, according to data compiled by LSEG.

Shares of the bank, which have gained about 8% so far in 2026, were up 2% in early trading. The shares have outperformed peers JPMorgan Chase JPM.N and Wells Fargo WFC.N so far in 2026.

"All said, a really good quarter from BAC, but it seems like the well-rounded results were somewhat understood as shares have rallied +6% over the last month," Evercore ISI said in a BofA note, titled "Cooking like a hot summer day."

JPMorgan and Wells Fargo also reported their second-quarter earnings on Tuesday, beating profit estimates on trading and dealmaking strength.

THE DEALMAKING BOOM

Global mergers and acquisitions, valued at over $10 billion, surged to record levels during the first half of 2026, according to LSEG data. The surge was driven by a more lenient regulatory environment that prompted major companies across sectors to seize the opportunity to execute deals.

Bank of America Securities acted as a joint book-running manager for the record-breaking $2 trillion debut of Elon Musk's SpaceX SPCX.O, a historic listing that supercharged the U.S. initial public offering market and boosted its rebound in 2026.

The bank also acted as a financial advisor for U.S. power company NextEra Energy's NEE.N $66.8 billion deal to buy Dominion Energy D.N, announced in May.

BofA's total investment banking fees jumped 50% to $2.1 billion in the second quarter. CEO Moynihan said earlier this quarter that investment banking was in "pretty good shape".

"The AI-driven capex super cycle has benefited equity issuance, M&A activity and debt financing, while trading has been helped by Iran-related volatility across asset classes," said Stephen Biggar, director of Financial Services Research at Argus Research.

"The $2.5 trillion in announced global M&A in the first half of the year is the gift that will keep giving, with banks getting paid as deals close over the next 6-9 months, while the mega-IPO pipeline remains intact for the back half of the year."

THE OTHER CATALYST

Strong consumer spending underpinned the resilient U.S. economy despite persistent macroeconomic uncertainty, serving as a vital catalyst for lenders.

Consumption has supported steady demand for new loans, providing major commercial banks with a stable operational foundation through interest income.

The bank's net interest income (NII) — the difference between what it earns on loans and pays out on deposits — ‌rose 9% to $16 billion in the quarter from a year earlier. Average loans and leases rose 8%, with growth across every business segment.

CFO Borthwick said that the positive forecast for full-year NII growth was supported by anticipated loan and deposit growth, fixed-rate asset repricing and balance sheet optimization.

"Our strategy is working," Borthwick said in a media call.

"We are making disciplined investments, growing organically, gaining market share, maintaining strong operating metrics, and driving higher levels of growth and profitability."