Bank of America reported first-quarter earnings on Tuesday that beat analysts’ profit and revenue estimates as interest income and investment banking got here in higher than expected.
Here’s what the corporate reported:
- Earnings: 83 cents per share adjusted, versus expected 76 cents, based on LSEG
- Revenue: $25.98 billion vs. expected $25.46 billion
The bank said profit fell 18% to $6.67 billion, or 76 cents per share; Excluding a $700 million FDIC valuation, profit was 83 cents per share. Revenue fell 1.6% to $25.98 billion as net interest income fell from a 12 months ago.
Net interest income, which is the difference between what the corporate earns from loans and investments and what it pays customers for his or her deposits, was $14.19 billion, beating StreetAccount’s estimate of $14.19 billion $13.93 billion.
The bank’s interest income was a “mild positive surprise,” even though it’s unclear whether meaning the metric will improve ahead of expected, Wells Fargo analyst Mike Mayo said in a research note on Tuesday.
The bank’s total deposits of $1.95 trillion rose about 1% from the fourth quarter, while loans were essentially flat at $1.05 trillion.
“I was not impressed that deposits and loans remained stagnant,” David Wagner, portfolio manager at Aptus Capital Advisors, said in an email. “The only areas in which BAC has performed well have been in areas where other banks have shown strength.”
Bank of America CFO Alastair Borthwick told analysts in a conference call on Tuesday that NII would likely fall to about $14 billion within the second quarter as asset management revenue and market rates of interest fell. However, it could grow within the second half of the 12 months, he said.
NII has declined in recent quarters as funding costs have increased together with the rise in rates of interest.
The bank’s shares fell greater than 3%.
Bank of America’s share price decline on Tuesday had more to do with the rise within the 10-year Treasury yield than with first-quarter results, based on KBW analyst David Konrad. Shares of many banks have been sensitive to returns over the past 12 months as rising yields caused some bond and loan holdings to lose value.
Investment banking revenue rose 35% to $1.57 billion, topping estimates of $1.36 billion and following the same rise at peers equivalent to Goldman Sachs And JPMorgan Chase.
It’s also well above the forecast from Borthwick, who told analysts last month that investment banking revenue would rise 10% to fifteen% from a 12 months ago.
The bank’s trading business also exceeded expectations. Fixed income revenue fell 3.6% to $3.31 billion, barely beating the estimate of $3.24 billion. Earnings from equities rose 15% to $1.87 billion, compared with the estimate of $1.84 billion.
