Bank of America 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 per cent to US$1.87 billion (S$2.51 billion) in the first three months of the year, the company said, 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 US$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 a statement on April 16.
Bank of America’s non-interest expenses soared 6.2 per cent from a year earlier to US$17.2 billion, driven by a US$700 million special assessment from the Federal Deposit Insurance tied to last year’s regional-bank failures. Charges and costs have been another focal point for investors, with persistent inflation putting pressure on spending. Analysts had expected a 2.6 per cent increase to US$16.7 billion. Without the FDIC charge, expenses would have totalled US$16.5 billion, or up 2 per cent.
The second-largest US bank also said that net interest income, a key source of revenue for the bank, fell 2.9 per cent to US$14 billion in the first quarter of 2024. Analysts had expected a 4 per cent drop for NII, the revenue collected from loan payments minus what depositors are paid.
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.
Last week, JPMorgan Chase & Co and Wells Fargo & Co both reported NII that missed analysts’ estimates, with executives pointing to increased funding costs.
Shares of Charlotte, North Carolina-based Bank of America, which gained 6.8 per cent in 2024 through Monday, were little changed at US$35.79 at 8.02 am in early New York trading.
In Bank of America’s wealth business, revenue climbed 5.2 per cent to US$5.59 billion. It was a record quarter for the division, driven by “higher asset-management flows”, chief financial officer Alastair Borthwick said on a conference call with reporters.
The company’s loan balances rose to US$1.05 trillion at the end of the first quarter, up 0.3 per cent from a year earlier and less than analysts’ estimates of US$1.06 trillion. Lending – a key focus for investors, with high interest rates making borrowing costlier – has remained “sluggish,” Mr Borthwick said on the conference call.
Charge-offs totalled US$1.5 billion, up 26 per cent from the last three months of 2023. Mr Borthwick said that an increase in charge-offs on credit cards is largely a hangover from the previous quarter and is flattening out.
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 US$1.95 trillion in the first quarter, up 1.2 per cent from the previous three months. BLOOMBERG
