Charlotte, North Carolina – Bank of America, the second-largest U.S. lender, exceeded first-quarter earnings expectations due to higher borrowing costs, which boosted net interest income beyond Wall Street forecasts. The company reported a net income of $6.7 billion, or 76 cents per share, with revenue totaling $25.8 billion. Adjusted earnings per share stood at 83 cents, surpassing the anticipated 76 cents, based on FactSet data, while revenue also exceeded analysts’ predictions of $25.5 billion.
With the bank’s shares rising by 1.5% in premarket trading on Tuesday, Bank of America revealed that its net interest income dropped to $14.2 billion from the previous year but still managed to outperform analysts’ NII projections for the quarter. Alistair Borthwick, the bank’s chief financial officer, mentioned in an analyst call that NII for the second quarter might approach $14 billion, hitting a seasonal low before showing improvement in the latter part of the year.
Investors closely monitored the impact of higher interest rates on all banks, especially Bank of America, identified by some analysts as the most rate-sensitive based on its extensive customer deposit base compared to other major U.S. banks. The bank cited higher deposit costs and “modest” loan growth as factors contributing to the NII decrease, as clients demanded higher interest payments while regulators encouraged banks to hold more liquidity, thus exerting pressure on net interest margins.
Bank of America’s earnings included a $700 million payment to the Federal Deposit Insurance Corp. in the first quarter, as anticipated by investors. Following a regional banking crisis, U.S. banks have been replenishing an insurance fund managed by the regulator. The investment bank segment saw a 35% increase in fees to $1.6 billion, with Merrill Lynch, the wealth management arm, reporting record client balances of $3.3 trillion and record revenue of $5.6 billion driven by burgeoning market conditions.
CEO Brian Moynihan highlighted that the sales and trading business posted its best first quarter in over a decade, generating revenue of $5.1 billion. Fixed income, currencies, and commodities trading declined to $3.2 billion, while equities revenue rose to $1.9 billion. Bank of America’s results from the quarter typically offer insights into the broader U.S. economy, beyond discussions on the interest rate landscape.
Shares of Bank of America have seen an 18% increase in the past year, slightly outpacing the KBW Nasdaq Bank Index’s 17% growth over the same period. Overall, the bank’s strong financial performance in the face of challenging economic conditions highlights its resilience and strategic approach in navigating market dynamics.