(Bloomberg) -- Bank of America Corp. reported elevated expenses and charge-offs for soured loans that were higher than analysts expected, failing to satisfy investors with a gain in its trading business.

Most Read from Bloomberg

• US Yields Spike as Hawkish Powell Puts 5% in Play: Markets Wrap

• China Tells Iran Cooperation Will Last After Attack on Israel

• Beyond the Ivies: Surprise Winners in the List of Colleges With the Highest ROI

• IMF Steps Up Its Warning to US Over Spending and Ballooning Debt

• What If Fed Rate Hikes Are Actually Sparking US Economic Boom?

Charge-offs totaled $1.5 billion, up 26% from the last three months of 2023, Bank of America said in a statement Tuesday. That was more than the $1.26 billion analysts had estimated. An increase in charge-offs on credit cards is largely a hangover from the previous quarter and is flattening out, Chief Financial Officer Alastair Borthwick said.

Shares of Charlotte, North Carolina-based Bank of America slumped as much as 5% to $34.15 Tuesday morning, their biggest drop in intraday trading in more than a year. They’re up 2.2% this year.

Bank of America’s non-interest expenses climbed 6.2% from a year earlier to $17.2 billion, driven by a $700 million special assessment from the Federal Deposit Insurance Corp. tied to last year’s regional-bank failures. Charges and costs have been a focal point for investors, with persistent inflation putting pressure on spending. Analysts had expected a 2.6% increase to $16.7 billion. Without the FDIC charge, expenses would have totaled $16.5 billion, or up 2%.

Still, the company’s traders notched one of their best first quarters on record as the company also reaped the benefits of elevated borrowing costs that pushed net interest income above analysts’ estimates.

Revenue from equities trading jumped 15% to $1.87 billion in the first three months of the year as clients grappled with a period of continued high interest rates and geopolitical tensions. That helped Bank of America top analysts’ net-income estimates, with the bank making $6.67 billion in the quarter.

“Bank of America’s sales and trading businesses continued their strong 2023 momentum this quarter, reporting the best first quarter in over a decade,” Chief Executive Officer Brian Moynihan said in the statement.

The second-largest US bank said that net interest income, a key source of revenue for the bank, fell 2.9% to $14 billion in the first quarter of this year. Analysts had expected a 4% drop for NII, the revenue collected from loan payments minus what depositors are paid.

Last week, JPMorgan Chase & Co. and Wells Fargo & Co. both reported NII that missed analysts’ estimates, with executives pointing to increased funding costs.

Read More: Bull Case Fizzles for Big US Banks to Earn Ever-More on Lending

In the second quarter, Bank of America’s NII is likely to approach $14 billion, which is expected to be the “low point” for the year, with growth coming in the second half of 2024, Borthwick said on a call with analysts. If rates remain high, that will benefit future NII results, he said.

Bank of America’s results offer another look at how US consumers and businesses are faring as the Federal Reserve leaves borrowing costs higher for longer. Lenders’ balance sheets overall have remained resilient amid elevated interest rates, though uncertainties remain, including inflationary pressures and attacks in the Middle East.

In a sign of companies returning to capital markets and dealmaking, investment-banking fees rose 35% to $1.6 billion in the first quarter, driven by strength in equity and debt underwriting.

“Investment banking saw a nice rebound in this quarter,” Moynihan said on the analyst call. “Our results reflect the benefits of investments made in our middle-market investment-banking teams and dual-coverage teams.”

Revenue in Bank of America’s wealth business also climbed, gaining 5.2% to $5.59 billion. It was a record quarter for the division, driven by “higher asset-management flows,” Borthwick said on a conference call with reporters.

The company’s loan balances rose to $1.05 trillion at the end of the first quarter, up 0.3% from a year earlier and less than analysts’ estimates of $1.06 trillion. Lending — a key focus for investors, with high interest rates making borrowing costlier — has remained “sluggish,” Borthwick said on the media call.

Deposits, another closely watched measure since the collapse of Silicon Valley Bank a year ago made the flight of funds more common, have remained stable at Bank of America. Total deposits rose to $1.95 trillion in the first quarter, up 1.2% from the previous three months.

--With assistance from Keith Gerstein.

Most Read from Bloomberg Businessweek

• A Resilient Global Economy Masks Growing Debt and Inequality

• Cities Use AI to Help Ambulances and Firetrucks Arrive Faster

• The Shadow Swiftie Economy Booms With Bootleg Bracelets and $1,150 Bodysuits

• Top Takeaways From Businessweek’s Investigation of Teenage Sextortion

• How a Pioneering Blackjack Master Beats the Odds of Aging

©2024 Bloomberg L.P.