Earnings

Bank of America tops estimates on better-than-expected interest income, investment banking

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Bank of America on Tuesday reported first-quarter earnings that topped analysts’ estimates for profit and revenue on better-than-expected interest income and investment banking.

Here’s what the company reported:

  • Earnings: 83 cents a share adjusted, vs. 76 cents expected, according to LSEG
  • Revenue: $25.98 billion, vs. $25.46 billion expected

The bank said profit fell 18% to $6.67 billion, or 76 cents a share; excluding a $700 million FDIC assessment, profit was 83 cents a share. Revenue slipped 1.6% to $25.98 billion as net interest income declined from a year earlier.

Net interest income, or the difference between what the company earns from loans and investments and what it pays customers for their deposits, was $14.19 billion, topping the $13.93 billion StreetAccount estimate.

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

The bank’s total deposits of $1.95 trillion climbed roughly 1% from the fourth quarter, while loans were essentially unchanged at $1.05 trillion.

“I was unimpressed with deposits and loans being flat,” David Wagner, portfolio manager at Aptus Capital Advisors, said in an email. “The only areas that BAC did well was where other banks have shown strength.”

Bank of America CFO Alastair Borthwick told analysts Tuesday in a conference call that NII will likely dip in the second quarter to about $14 billion on drops in wealth management and markets interest income. Though it could grow in the second half of the year, he said.

NII has been declining in recent quarters as funding costs have climbed along with the rise in interest rates.

Shares of the bank fell more than 3%.

Bank of America’s share decline Tuesday has more to do with the rise in the 10 year Treasury yield than first quarter results, according to KBW analyst David Konrad. Shares of many banks have been yoked to yields in the past year, as rising yields means some bond and loan holdings decline in value.

Investment banking revenue jumped 35% to $1.57 billion, exceeding the $1.36 billion estimate and following a similar rise at rivals including Goldman Sachs and JPMorgan Chase.

It’s also considerably higher than the guidance given by Borthwick, who told analysts last month to expect investment banking revenue to rise by 10% to 15% from a year earlier.

The bank’s trading operations also edged out expectations. Fixed income revenue fell 3.6% to $3.31 billion, slightly beating the $3.24 billion estimate, and equities revenue rose 15% to $1.87 billion, compared with the $1.84 billion estimate.

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