Yahoo Finance Bank of America posts record earnings, but shares drop on growth fears
Bank of America (BAC) on Tuesday reported record first-quarter earnings that blew away market expectations, led by a surge in consumer loans and deposit activity.
Following a day of disappointing results from other big banks, the consumer and investment-banking giant posted record earnings per share of 70 cents, compared to 62 cents in the comparable year-ago quarter.
BofA saw revenue of $23 billion, versus the prior year-ago period’s $23.1 billion. Analysts, on average, expected the bank to report 66 cents on $23.1 billion of revenue, according to Bloomberg.
“Economic growth and consumer activity in the U.S. continue to be solid, businesses of every size are borrowing and driving the economy, and asset quality is strong,” CEO Brian Moynihan said in a statement.
However, the company’s stock, traded on the New York Stock Exchange, opened around 2% lower around $29 per share. On the earnings call, BofA’s CFO warned on slowing loan growth this year, raising concerns about whether the company’s blockbuster growth was sustainable.
The company saw a big jump in net interest yield, which is watched by analysts as a barometer of how profitable a bank’s lending activities are, by 9 basis points to 2.51%.
Loans across the firm’s consumer and commercial businesses rose at least 3%, while deposits rose 5% to $1.4 trillion.
Average deposits grew $23 billion, or 3%, while average loans grew $13 billion, or 5%. The bank also saw more clients opening counts digitally, with 27.1 million active mobile banking users, up 9% from a year ago.
Moynihan added that the firm is adding 350 more financial centers in new and existing markets by 2021 that will cover more than 90% of the U.S. population.
Digging into the results further, revenue from investment banking fees came in at $1.3 billion, a drop of 7% from the same period a year ago. The slump in investment banking fees was driven by lower debt and equity underwriting fees.
Meanwhile, revenue from sales and trading, excluding DVA, dropped 13% to $3.6 billion. Within sales and trading equities trading revenues dropped 22% to $1.2 billion, while FICC fell 8% to $2.4 billion.
“It was a challenging capital markets environment but our team and platform are optimized to serve clients and generate stable revenues across a range of market conditions over time,” Moynihan said.
BofA is among the first wave of major banks to report earnings. Monday’s results, which included Goldman Sachs and Citigroup, largely disappointed investors. On Tuesday, BlackRock also reported strong earnings that exceeded market estimates.
Julia La Roche contributed to this reporting.
