Bank of America profit falls on interest payments

Bank of America’s first-quarter profit fell as its consumer division weakened and the lender wrote off more loans, particularly for credit cards.

Bank of America is among the large lenders, including rival JPMorgan, that are weighing the potential for the US Federal Reserve (Fed) to cut interest rates in 2024.

The move could crimp banks’ income from interest payments, but could potentially spur economy activity and borrower demand.

Bank of America’s net interest income — the difference between what it earns on loans and pays for deposits — slid 3% to $14bn in the quarter due to higher deposit costs and modest loan growth.

An uncertain economic outlook and shifting expectations for US interest rate cuts have made it more difficult to predict future profits, banking executives said last week.

If the Fed keeps rates higher for longer in the coming months, lenders that made bumper profits from rising interest rates in the last two years could build on their gains.

But their earnings could diminish if a potential economic slowdown deters borrowers from taking out loans.

The second-largest US lender earned a profit of $6.7bn, or 76c a share, for the three months ended March 31, down from $8.2bn, or 94c a share, a year earlier.

Revenue in Bank of America’s investment banking and wealth management climbed, partially offsetting the decline in interest payments.

Investment banking fees jumped 35% to $1.6bn.

In March, CFO Alastair Borthwick said he expected investment banking revenue to jump 10% to 15% in the first quarter from a year earlier.

Revenue from the segment rose at rival JPMorgan Chase and Citigroup in the first quarter, fuelled by gains in debt and equity capital markets.

On Monday, Goldman Sachs’ profit beat estimates as underwriting, deals and bond trading lifted its earnings per share to the highest since late 2021.

Industry executives have, however, expressed guarded optimism about the nascent deal-making recovery, despite a resilient US economy, buoyant equities and a flurry of large deals.

Bank of America also took a $700m charge in the reported quarter to replenish a government deposit insurance fund, drained by $16bn to cover depositors of two banks that collapsed in 2023.

Profit from Bank of America’s Merrill wealth management division rose about 10% to $1bn as rising equity values generated higher fees.

The division grew assets under management to $1.4-trillion from $1.3-trillion in the fourth quarter.