Boosted by strong investment banking and trading results, as well as the release of loan-loss reserves, Bank of America Corp. (BAC, Financial) reported better-than-expected first-quarter financials before the opening bell on Thursday.
The Charlotte, North Carolina-based bank posted earnings of 86 cents per share, topping Refinitiv's estimates of 66 cents. Revenue increased only 0.2% from the prior-year quarter to $22.9 billion, but still surpassed expectations of $22.1 billion.
While the consumer banking division saw revenue decrease 12% to $8.1 billion, the company recorded growth in all its other businesses during the three-month period ended March 31. Sales increased 1% each in the global wealth and investment management and global banking segments to $5 billion and $4.6 billion. The global markets business' sales grew 19% to $6.2 billion, driven by a 22% jump in fixed income trading to $3.3 billion and a 10% rise in equities revenue to $1.8 billion.
Chief Financial Officer Paul Donofrio commented on the bank's performance, which he says was supported by "the responsible way we have operated the company over many years."
"We saw strong growth in our capital markets and wealth management businesses, which allowed us to absorb additional expenses and still report $8.1 billion in earnings," he said. "We believe our strong balance sheet, the diversity of our business lines, and the careful way we have managed risk for many years should enable us to continue to return to our shareholders the excess capital that is not needed to support economic growth, deliver for customers and communities, invest in our future and sustain strength and stability through future economic cycles."
As a result of lower interest rates, the bank noted net interest income declined 16% to $10.2 billion.
The company also released $2.7 billion in reserves for loan losses during the quarter due to the improving U.S. economic outlook. As the Covid-19 crisis led many to believe a wave of defaults was coming, Bank of America set aside $11.3 billion for credit losses last year. However, government stimulus programs appear to have prevented most of the feared losses.
In a statement, Chairman and CEO Brian Moynihan praised Bank of America's "exceptional results" and expressed his optimism for the future.
"While low interest rates continued to challenge revenue, credit costs improved and we believe that progress in the health crisis and the economy point to an accelerating recovery," he said. "The strength of our balance sheet, our complementary and diverse set of businesses, and our talented teammates position us to perform well in that environment."
Despite the strong quarterly performance, shares of Bank of America were down 4.19% at $38.21 on Thursday morning due to concerns regarding higher expenses and weaker-than-expected loan growth. GuruFocus estimates the stock has climbed more than 70% over the past year.
Disclosure: No positions.
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