Bank of America leaned on retail lending for 5.7% profit growth in 1Q

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Bank of America’s consumer bankers outdid their colleagues in trading for the second quarter in a row as the company leaned on retail lending to generate record profit.

Net interest income at the consumer unit — revenue from customers’ loan payments minus what the bank pays depositors — climbed 9.7% in first three months of 2019 from a year earlier, fueled by a rise in loans from the retail business. That outweighed a 13% drop in trading revenue.

The performance echoes that of Bank of America’s bigger competitor, JPMorgan Chase, where net interest income also rose and trading revenue fell. Consumer banks are reaping the benefits of the Federal Reserve’s four interest rate increases last year and a relatively buoyant U.S. economy. The first quarter could be the last hurrah for that catalyst as the Fed pauses its rate-tightening cycle and investors prepare for the next recession.

“Economic growth and consumer activity in the U.S. continue to be solid,” Chief Executive Officer Brian Moynihan said Tuesday. “It was a challenging capital-markets environment, but our team and platform are optimized to serve clients and generate stable revenues across a range of market conditions over time.’’

Despite the healthy retail performance, Bank of America’s trading and investment bank results reflected investor caution even after the S&P 500 Index recouped most of its losses from a selloff at the end of 2018.

Trading revenue fell to $3.55 billion, beating analysts’ estimates of $3.49 billion. Investment banking fees slipped 7% to $1.26 billion, compared with analysts’ estimate for $1.29 billion, suggesting the bank’s efforts to turn around the unit have yet to pay off.

Bank of America shares, up 21% this year through Monday, were little changed in early trading.

Other key results:

  • Net income gained 5.7% to $7.31 billion, or 70 cents a share, surpassing estimates of 66 cents.
  • Revenue fell slightly to $23.2 billion, matching the median analyst forecast.
  • The efficiency ratio, a measure of profitability, improved to 57.5% from 60% a year earlier.
  • Operating leverage was positive for the 17th consecutive quarter.
Bloomberg News