NEW YORK — Bank shares rose Friday as Bank of America Corp. continued the trend of big banks posting better-than-expected results and as General Electric Co.'s troubled GE Capital unit saw signs of stabilization.
Big banks have been posting better results recently as the improving economy leaves its mark on their performance. Earlier this week, JPMorgan Chase & Co. said its first-quarter profit rose a higher-than-expected 55% on a big drop in credit-loss provisions.
"JPMorgan led us into the quarter and set the bar high," Raymond James analyst Anthony Polini said. "Bank of America jumped right over it."
Bank of America's shares were recently up 1% at $19.67 in premarket trading. Polini said he wouldn't be surprised if some investors chose to sell on the good news, as the banks have had a strong run — this is the ninth straight week the big banks are higher, he said. Bank of America's shares are up 29% so far this year, through Thursday, and have gained 14% in the last month. JPMorgan's shares were up a penny premarket to $47.82.
Bank of America posted a profit of $3.18 billion, or 28 cents a share, down from $4.24 billion, or 44 cents a share, a year earlier. The results included $521 million in restructuring changes and $765 million in merger charges. Revenue dropped 11% to $31.97 billion. Analysts polled by Thomson Reuters forecast earnings of 9 cents a share on $27.97 billion in revenue.
Credit-loss provisions fell to $9.81 billion from $13.38 billion a year earlier and $10.11 billion in the prior quarter, while the net charge-off rate was 4.44%, compared with 2.85% a year earlier and 3.71% in the prior quarter. Bank of America said charge-offs would have fallen sequentially absent new accounting rules regarding securitized credit-card and other loans and mortgage modifications.
Reserve levels fell at both Bank of America and JPMorgan, and Polini said that is probably the most positive item in the quarter as it speaks to the banks' outlook for credit losses. The first thing banks will do is stop building reserves when they see a light at the end of the tunnel, he noted.
Polini went on to say there hasn't been much loan growth so far this quarter, which means there hasn't been a strong impact from the recovery, but his firm sees the credit cycle picking up.
Meanwhile, GE's first-quarter profit fell 31%, dragged down by a loss from discontinued operations and a sharply smaller tax benefit, but results still topped analysts' expectations.
Chief Executive Jeff Immelt said he was "encouraged" by the performance of GE Capital, which has been a thorn in the company's earnings side for more than two years. Profit at the unit declined 41% in the first quarter, while revenue dropped 10%. But Immelt said losses at the finance unit appear to have peaked and said, "We are seeing solid signs of stabilization."
GE's shares rose 0.9% to $19.67 premarket.
More big banks are set to report first-quarter results next week. Citigroup Inc. will report earnings on Monday, investment bank Goldman Sachs Group Inc. on Tuesday and broker Morgan Stanley on Wednesday.
Citigroup has had more and different troubles than some of the other banks, Polini said, but he said that from the other big banks he would expect similar underlying themes to what the market has already seen from JPMorgan and Bank of America.
Citigroup's shares were up 1.3% to $4.87 premarket, while Goldman Sachs edged up 0.2% to $184.71 and Morgan Stanley gained 0.5% to $31.03.