Bank of America Profit Doubles -- 2nd Update
April 15 2021 - 9:09AM
Dow Jones News
By Ben Eisen
Bank of America Corp. said Thursday that its profit doubled in
the first three months of the year.
The Charlotte, N.C.-based lender posted earnings of $8.05
billion in the first quarter. That compared with $4.01 billion a
year earlier, when banks took big hits to their earnings to begin
stockpiling rainy-day reserves at the beginning of the
pandemic.
The bank made 86 cents a share, beating the 66 cents forecast in
a FactSet poll of analysts.
Earnings from the largest banks have reflected heightened
optimism about an economic rebound. JPMorgan Chase & Co. and
Wells Fargo & Co. said Wednesday they both released money they
had socked away last year to cover widespread loan defaults.
Bank of America said it released $2.7 billion of its reserves,
boosting its bottom line. Charge-offs were down from a year
earlier.
Like JPMorgan and Goldman Sachs Group Inc., Bank of America also
benefited from a crazy quarter on Wall Street. Higher trading
revenue and investment banking fees helped power earnings.
Bank of America CEO Brian Moynihan has long expressed optimism
about the economy, saying consumer spending is picking back up.
"We believe that progress in the health crisis and the economy
point to an accelerating recovery," Mr. Moynihan said in a
statement.
The bank now expects U.S. gross domestic product to return to
pre-pandemic levels by the third quarter of this year, Paul
Donofrio, chief financial officer, said on a call with reporters. A
few months ago, the expectation was that GDP wouldn't return to
those levels until 2022. Such forecasts help determine how much the
lender sets aside for bad loans.
But America's second largest bank is still managing through the
crisis, which ushered in record low rates. That has eroded the
spread between what banks pay to borrow and what they earn from
lending. Net interest income totaled $10.2 billion in the first
quarter, down 16% from $12.13 billion a year earlier.
Like other banks, the lender's book of loans continued to
shrink, reflecting soft demand from consumers and businesses.
Outstanding loans and leases also dropped by 14% to $903.01
billion.
Noninterest income rose 19% to $12.62 billion, from $10.64
billion a year earlier, helped by fees in its capital-markets
businesses.
Adjusted trading revenue rose 17% to $5.08 billion from $4.34
billion a year earlier. By comparison, trading revenue rose 47% at
Goldman and 25% and JPMorgan.
A boom in mergers and stock offerings boosted investment-banking
divisions, particularly those working with special-purpose
acquisition companies. Bank of America also benefited, led by
equity issuance. Investment banking fees rose 62% to $2.25 billion,
from $1.39 billion a year earlier.
Altogether, the bank's revenue was flat at $22.82 billion, from
$22.77 billion a year ago. Still, that beat the $21.9 billion
analysts had forecast.
The bank separately said its board approved a $25 billion share
buyback plan. The Federal Reserve has said its restrictions on
shareholder returns will expire at the end of June.
Bank of America shares rose in premarket trading Thursday. Bank
stocks have been hot this year, rising more than the broader market
after falling sharply when the coronavirus hit the U.S. last
year.
The bank's expenses jumped 15% in the first quarter to $15.52
billion, from $13.48 billion a year ago. Bank of America noted some
one-time expenses, including about $300 million from incentive
compensation changes and $160 million in severance.
A boom in mergers and stock offerings boosted banks'
investment-banking divisions, particularly those working on
special-purpose acquisition companies. Bank of America also
benefited, led by equity issuance. Investment banking fees rose 62%
to $2.25 billion, from $1.39 billion a year earlier.
Adjusted trading revenue rose 17% to $5.08 billion from $4.34
billion a year earlier. By comparison, trading revenue rose 47% at
Goldman and 25% and JPMorgan.
Write to Ben Eisen at ben.eisen@wsj.com
(END) Dow Jones Newswires
April 15, 2021 08:54 ET (12:54 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.
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