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% to $1.87 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 $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 Tuesday.
Bank of America's non-interest expenses soared 6.2% from a year earlier to $17.2 billion, driven by a $700 million special assessment from the Federal Deposit Insurance Corp. 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% increase to $16.7 billion. Without the FDIC charge, expenses would have totaled $16.5 billion, or up 2%.
The second-largest US bank also said that net interest income, a key source of revenue for the bank, fell 2.9% to $14 billion in the first quarter of this year. Analysts had expected a 4% 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 and Wells Fargo 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% this year through Monday, were little changed at $35.79 at 8:02 a.m. in early New York trading.
In Bank of America's wealth business, revenue climbed 5.2% to $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 $1.05 trillion at the end of the first quarter, up 0.3% from a year earlier and less than analysts' estimates of $1.06 trillion. Lending — a key focus for investors, with high interest rates making borrowing costlier — has remained "sluggish," Borthwick said on the conference call.
Charge-offs totaled $1.5 billion, up 26% from the last three months of 2023. 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 $1.95 trillion in the first quarter, up 1.2% from the previous three months.
