Bofa profit drops as provisions rise
NEW YORK: Bank of America (Bofa) reported a drop in first-quarter profit as the lender set aside more money to cover souring loans, but still beat estimates on surging investment banking fees.
A resilient US economy, buoyant equities and a flurry of large deals have reignited hopes of a nascent recovery in dealmaking, although industry executives have expressed guarded optimism.
Investment banking fees jumped 35% to $1.6 billion in the reported quarter from a year earlier, partially offseting a decline in interest payments due to slow demand from borrowers.
Last month, Chief Financial Officer Alastair Borthwick said he expected investment banking revenue to jump 10% to 15% in the first quarter.
Revenue from the segment also rose at rival Jpmorgan Chase and Citigroup in the first quarter, fueled by gains in debt and equity capital markets.
Excluding one-off items, Bank of America earned 83 cents a share in the quarter ended March, sailing past analysts’ average estimate of 76 cents a share, according to LSEG data.
Its sales and trading revenue rose 2% to $5.2 billion with equities contributing a 15% jump and fixed income currencies and commodities (FICC) posting a 4% decline. “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.
Shares of Bank of America rose 0.9% before the bell. “We expect the market to be OK with these numbers,” wrote David George, analyst at Robert W. Baird, about Bofa results. “There could be some downside due to weak credit performance in CRE (commercial real estate) and card loans.”
Bank of America set aside $1.3 billion in provisions in the first quarter, up from $931 million a year earlier. It also took more writedowns on office loans, which partly increased loan losses for its commercial division.