Lending markets

Bank of America beats earnings estimates on strong consumer lending – Markets

Bank of America Corp reported a weaker-than-expected first-quarter profit decline of 13% on Monday as strong growth in its consumer finance business helped cushion the blow from a slowdown in global transactions.

The bank reported a 9% increase in retail banking revenue to $8.8 billion in the quarter ended March.

“First quarter results were strong despite challenging markets and volatility,” Chief Financial Officer Alastair Borthwick said in a statement.

Net interest income increased $1.4 billion from the prior year quarter, supported by strong loan and deposit growth. Going forward, and given the anticipation of higher interest rates on the forward curve, we expect to take greater advantage of the benefits of our deposit franchise. »

However, total investment banking fees plunged 35% to $1.5 billion in the quarter.

Major U.S. banks enjoyed a trading boom last year after the Federal Reserve injected liquidity into capital markets to blunt the economic impact of the COVID-19 pandemic.

This year, however, the investment banking business has been impacted by geopolitical unrest fueled by Russia’s invasion of Ukraine which dampened last year’s breakneck pace of deals and market boom. IPOs.

Bank of America’s global banking segment, which houses the investment banking business, recorded $165 million in provisions for credit losses, primarily because it built up reserves related to its exposure to Russia and loan growth.

The second-largest U.S. bank by assets released $362 million of reserves it had set aside for bad debt.

Net interest income, a key measure of how much the bank can earn from its loans, rose 13% to $11.6 billion in the quarter.

Due to the composition of its balance sheet, Bank of America is the most sensitive of the major US banks to changes in interest rates and should benefit from the US Federal Reserve’s aggressive plan to raise interest rates.

Earnings applicable to common shareholders fell nearly 13% to $6.6 billion, or 80 cents per share, for the quarter ended March 31, from $7.56 billion, or 86 cents per share, a year earlier.

The earnings figure for the latest quarter presented difficult comparisons, as the prior year period included earnings from record trading activity and a large release of reserves.

The bank reported an 8% rise in profit before tax and before provisions, which eliminates reserves.

Analysts on average had expected earnings of 75 cents per share, according to Refinitiv’s IBES estimate.

The bank’s shares rose 1% in premarket trading.

Bank of America ends a mixed earnings season for Wall Street banks with peers JP Morgan Chase, Goldman Sachs, Wells Fargo, Morgan Stanley and Citigroup posting earnings declines.