Bank of America more than doubled net income in the first quarter, comfortably beating forecasts as it booked a $1.9bn gain on the improving outlook for loan losses and enjoyed a 62 per cent rise in investment banking fees.
America’s second-biggest bank by assets made net income of just over $8bn in the first three months of 2021, versus the $4bn it made in the same period a year ago and the $5.6bn that analysts expected.
The biggest difference was in loan loss charges, which took a $4.8bn bite of out profits in the first quarter of 2020 as banks braced themselves for a wave of pandemic-induced defaults. In the most recent period, Bank of America was able to book a $1.9bn gain because it now expects loan losses to come in below the bumper amounts set aside under accounting rules last year.
“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,” chair and chief executive Brian Moynihan said on Thursday, describing the first quarter as “exceptional”.
BofA’s results mirror the pattern set by JPMorgan Chase and Goldman Sachs on Wednesday when they kicked off Wall Street’s earnings season with profit growth well above what analysts expected, on the back of a recovering US economy and surging markets for trading and dealmaking. Citigroup is expected to keep up the trend when it reports earnings on Thursday.
BofA’s investment banking fees rose to $2.25bn from $1.39bn a year earlier, better than the 57 per cent reported by JPMorgan Chase but worse than the 73 per cent rise at Goldman Sachs. BofA’s trading fees were up almost 10 per cent but its equities desk failed to capture the big lift enjoyed by rivals.
Group revenues were flat at $22.8bn, hinting at the challenges to Bank of America’s core lending and deposit-taking businesses in an environment where low interest rates are crushing margins, while pandemic-related uncertainty is making borrowers think twice. The bank’s shares were up 1.4 per cent in pre-market trading.