Bank of America’s cost-cutting drive pushes profit to record
Bank of America Corp. hit a milestone in its years-long effort to get costs under control.
First-quarter expenses totaled about 60% of revenue, the best ratio in more than five years. That helped push profit above analysts’ estimates, and corporate tax cuts spurred earnings to a record. Net interest income got a bigger boost than expected from higher interest rates, but fixed-income trading disappointed.
Chief Executive Officer Brian Moynihan, who’s had the top job for eight years, spent much of that time working to free the bank from legal entanglements and other costs that weighed on the lender after the financial crisis. The tax cuts could help the bank turn more to growth initiatives, as it has laid out plans to open new branches and expand into states including Ohio.
The company, the second-largest U.S. bank, reported net income of $6.92 billion, a 30% increase over a year earlier that surpassed analysts’ expectations. Total revenue climbed 3.7% to $23.3 billion, also higher than estimates.
Part of the bank’s success in the quarter came from trading stocks in the choppy environment traders like best. Equities revenue surged 38% to $1.52 billion, compared with analysts’ expectations for $1.18 billion. Fixed-income revenue posted a surprise 13% drop to $2.54 billion.
Here’s a summary of Bank of America’s first-quarter results:
- Total trading revenue rose to $4.05 billion, compared with $4.03 billion a year earlier.
- Net interest income climbed 4.5% to $11.8 billion, beating analysts’ expectation for $11.6 billion.
- The firm’s net interest margin was unchanged at 2.39%.
- Provisions for credit losses improved to $834 million. Analysts had estimated a $969 million boost to reserves.
- The firm increased the reserve last year because of trouble with loans tied to furniture retailer Steinhoff International Holdings NV and as more credit-card loans soured.