On Thursday, Bank of America reported a profit of $8.1 billion and revenue of $22.9 billion for first quarter. The profit reported by the Bank of America surpassed Wall Street estimates on booming investment banking and trading results, as well as the release of loan-loss reserves as fewer consumers were expected to default on debts.
CEO Brian Moyihan in the release said that “while low interest rates continued to challenge revenue, credit costs improved and we believe that progress in the health crises and the economy point to an accelerating recovery”. The company’s shares fell 3.9 percent and analysts including Ken Usdin of Jefferies were quick to point out that the Bank of America experienced heightened expenses in the first quarter. According to Ken Usdin, costs were $600 million higher than his estimate, excluding unusual items. Other analysts mentioned a weaker-than-expected loan growth as one aspect of concern the bank should be focusing on.
The Bank of America posted a profit of $8.1 billion or 86 cents a share. This surpasses the 66 cents per share that analysts at Refinitiv expected. $22.9 billion was generated in revenue and surpasses the expected $22.1 billion estimate that analyst expected.
The Bank of America, as well as other banking rivals, enjoyed a huge benefit from the improving U.S. economic outlook in recent months. The Bank of America released $2.7 billion in reserves for loan losses in the quarter. The firm set aside $11.3 billion for credit losses as it expected a wave of defaults which would be caused by the coronavirus. Government interventions like stimulus programs, however, seem to have prevented most of these expected losses, and banks have begun to release more of their reserves this quarter.
The Bank of America also witnessed a boost from its trading operations just like JP Morgan and Goldman. Fixed income trading revenue jumped 22 percent to $3.3 billion, surpassing analysts’ estimates by roughly $66o million. Equities revenue jumped 10 percent to $1. 8 billion, about $170 million more than expected.
The firm’s Wall Street bankers were not resting as well. The firm posted an increase of 62 percent in investment banking fees to $2.2 billion. This was almost $400 million more than analyst had estimated and was fueled by a 218 percent surge in equity underwriting fees to $900 million.
Bank of America also separately announced a $25 billion stock repurchase program.
Shares of Bank of America have risen 32 percent this year, surpassing the 26 percent gain of the KBW Bank Index.