BAC Bank of America Corporation

By Rachel Louise Ensign 

Bank of America Corp. said its first-quarter profit rose as trading jumped and the lender started to see the benefits of a long-awaited rise in interest rates.

Quarterly profit at the Charlotte, N.C.-based bank was $4.86 billion, up from $3.47 billion a year ago. Per-share earnings were 41 cents. Analysts had expected 35 cents a share.

Revenue was $22.25 billion, up from $20.79 billion a year ago. On an adjusted basis, revenue of $22.45 billion compared with analysts' expected figure of $21.61 billion.

Shares rose 1.2% to $23.08 in premarket trading.

The bank's fortunes are improving after heavy loan losses from the financial crisis and debilitating legal fees in its wake. Bank of America shares have risen 61% over the past year, among the best of the six largest U.S. banks, buoyed by the prospect of a stronger economy and an election result that led to optimism about regulatory and tax relief. For a period earlier this year, the stock traded above its book value for the first time since the financial crisis.

The bank, run by Chairman and CEO Brian Moynihan, has been expected to get a bigger boost from rising interest rates than peers. Most consumer banks' lending businesses benefit from a Federal Reserve rate increase. But Bank of America's balance sheet -- full of deposits and mortgage securities -- is particularly well-positioned.

The lender's net interest income increased 7.4% to $11.058 billion during the quarter from the prior quarter, surpassing the lender's projection that the income metric would advance about $600 million per quarter starting this year.

Bank shares broadly have rallied since the election. Mr. Moynihan has said the Trump election has reshaped the thinking of investors skeptical of bank stocks.

Still, some investors are starting to question whether bank stocks rallied too far. For instance, J.P. Morgan Chase & Co. and Citigroup Inc. shares fell last week despite the banks posting sharp increases in first-quarter profit.

Trading has started 2017 strong, compared with a weak 2016 start. Trading revenue at Bank of America, excluding an accounting adjustment, rose 22.5% to $4.029 billion from $3.288 billion in the first quarter of last year.

In addition to trading, profit was up in the bank's main business units, including consumer banking, global wealth and investment management, and global banking.

Loans, whose growth has started slowing down across the banking industry, grew 0.6% from the year earlier and was flat from the prior quarter. The broader slowdown in lending runs counter to the optimism that Mr. Moynihan and other bank executives have said they're hearing from customers. "People have to remember, it's a 2% growth economy. So the loan demand is going to match that," Mr. Moynihan said in April.

Quarterly noninterest expenses rose 0.2% to $14.848 billion from $14.816 billion a year ago. Mr. Moynihan has made cost-cutting a key tenet of his business strategy, and last year he promised to cut another $5 billion in annual expenses by 2018. To get to that level, the bank would need to turn in expenses averaging $13.25 billion a quarter.

Write to Rachel Louise Ensign at rachel.ensign@wsj.com

(END) Dow Jones Newswires

April 18, 2017 07:52 ET (11:52 GMT)

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