Bank Of America Tops Expectations On Interest Income, Investment Banking

(CTN News) – Bank of America Corporation reported Tuesday that it had exceeded analysts’ estimates for profit and revenue in its first quarter, driven by better-than-expected interest income and investment banking revenues.

According to the company, the following was reported:

• LSEG expects earnings of 76 cents per share, while LSEG reports earnings of 83 cents a share adjusted

• A revenue of $25.98 billion was reported, compared to an expectation of $25.46 billion

As a result, Bank Of America profit fell 18% to $6.67 billion, or 76 cents per share; excluding a $700 million FDIC assessment, the profit was 83 cents per share. Net interest income declined from a year earlier to $25.98 billion, resulting in a 1.6% decline in revenue.

The company’s net interest income, or the difference between loans and investments and deposits paid to customers, stood at $14.19 billion, exceeding StreetAccount’s estimate of $13.93 billion.

In a research note, Wells Fargo analyst Mike Mayo said Tuesday that the bank’s interest income was a “slight positive surprise,” though it is unclear if this means the metric will improve sooner than expected.

At $1.95 trillion, Bank Of America’s total deposits increased approximately 1% over the fourth quarter, while total loans remained relatively unchanged at $1.05 trillion.

David Wagner, portfolio manager at Aptus Capital Advisors, stated that he was unimpressed with flat deposits and loans. The only areas in which BAC performed well were those where other banks demonstrated strength.

According to Bank of America’s CFO, Alastair Borthwick, NII will likely decline to about $14 billion during the second quarter due to declines in wealth management and markets interest income. However, he predicted that it could grow in the second half of the year.

NII has declined in recent quarters due to an increase in funding costs and an increase in interest rates.

More than 3% of Bank Of America shares were down.

In the opinion of KBW analyst David Konrad, the decline in Bank of America’s share price on Tuesday is more of a result of the rise in the 10-year Treasury yield than the company’s first quarter results. There has been a strong correlation between bank shares and yields over the past year, as rising yields have resulted in a decline in the value of some bonds and loans held by banks.

A 35% jump in investment banking revenues was reported, exceeding the $1.36 billion estimate and following similar increases at rivals such as Goldman Sachs and JPMorgan Chase.

It is also significantly higher than the guidance given by Borthwick last month, who forecast that investment banking revenue would increase by 10% to 15% from a year ago.

The bank’s trading operations also exceeded expectations. Revenue from fixed income fell 3.6% to $3.31 billion, slightly surpassing the $3.24 billion estimate, while revenue from equities increased 15% to $1.87 billion.

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