Bank of America (BofA) has reported first-quarter earnings that surpassed expectations, with the second-largest U.S. lender benefiting from higher borrowing costs, leading to net interest income exceeding Wall Street’s estimates.
The financial giant disclosed a net income of $6.7 billion, or 76 cents per share, on revenue totaling $25.8 billion for the quarter. Adjusted earnings stood at 83 cents per share, outpacing FactSet’s consensus of 76 cents per share, while revenue surpassed analysts’ expectations of $25.5 billion.
However, despite the positive earnings report, BofA’s stock experienced a 3.5% decline on Tuesday, making it one of the worst performers in the S&P 500 index for the day. This marked its largest one-day percentage decrease since March 2023, contrasting with the slightly negative performance of the broader market.
Net interest income, a crucial revenue stream for banks, amounted to $14.2 billion, down from $14.6 billion a year earlier. Nonetheless, this figure exceeded analysts’ projections for the quarter. Alastair Borthwick, BofA’s chief financial officer, anticipates that second-quarter net interest income could reach approximately $14 billion, with expectations for improvement in the second half of 2024.
The bank attributes the decline in net interest income to higher deposit costs offsetting increased yields and “modest” loan growth. Like its counterparts, BofA benefits from higher interest payments from clients but faces increased payouts for customer deposits, which have been impacted by clients shifting funds into higher-cost products.
BofA’s overall results showed a decline from the year-ago period, with earnings per share and revenue dropping from 94 cents and $26.4 billion, respectively. Additionally, the bank incurred a $700 million payment in the first quarter to the Federal Deposit Insurance Corp., in line with investor expectations, as part of efforts to replenish an insurance fund following the regional-banking crisis last spring.
The investment bank segment notably saw fees rise by 35% year-over-year to $1.6 billion. Merrill Lynch, the wealth management arm, reported record-high client balances of $3.3 trillion and record revenue of $5.6 billion, driven by buoyant markets.
CEO Brian Moynihan highlighted the strong performance of the sales and trading business, which delivered its best first quarter in over a decade with revenue reaching $5.1 billion. Fixed income, currencies, and commodities trading (FICC) declined to $3.2 billion, while equities revenue rose to $1.9 billion.
Analysts are keen to glean insights from BofA’s results regarding the broader U.S. economy, particularly in terms of consumer spending, investment banking pipelines, and commentary on the bank’s bond portfolio. Despite the recent stock decline, BofA shares have shown resilience, rising 18% in the past year, slightly outperforming the KBW Nasdaq Bank Index.