Bank of America reported better than expected earnings on Monday as the second-largest US lender capitalized on higher interest rates and a lending rebound.
The Charlotte-based bank, the last of the US megabanks to report earnings, was the only big lender to announce an increase in revenue for the first three months of the year. Total revenue rose 2 per cent to $ 23.2bn driven by a 13 per cent jump in net interest income as loans grew 8 per cent and the bank aggressively deployed cash to buy fixed-income securities. That was broadly in line with analysts’ expectations for $ 23.1bn.
“Going forward, and with the forward curve expectation of rising interest rates, we anticipate realizing more of the benefit of our deposit franchise,” chief financial officer Alastair Borthwick said in a statement.
However, net income fell 12 per cent compared to a year ago when earnings were boosted by a $ 2.7bn release of credit reserves that had been set aside to cover pandemic-related loan losses that never materialized.
Overall, first-quarter profit fell to $ 7.1bn, or 80 cents per share, compared to $ 8.1bn or, 86 cents per share, a year earlier. Analysts polled by FactSet had forecast earnings of 75 cents per share.
Last week, Wall Street banks set billions of dollars aside for potential losses related to Russia’s invasion of Ukraine and its recessionary impacts on the US economy.
But BofA’s direct exposure to Russia was “very minor,” Borthwick said.
The bank set aside $ 30mn to cover potential credit losses during the first quarter, compared to the $ 1.5bn and $ 1.9bn provisioned by JPMorgan Chase and Citigroup, respectively.