Bank of America Profit Doubles -- 3rd Update
By Ben Eisen
Bank of America Corp. said its profit doubled in the first three
months of the year after it released money that it had set aside
for bad loans.
The Charlotte, N.C.-based lender on Thursday posted earnings of
$8.05 billion for 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
Bank of America 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
Like JPMorgan and Goldman Sachs Group Inc., the bank also
benefited from a crazy quarter on Wall Street. Higher trading
revenue and investment banking fees helped power earnings.
Still, a jump in expenses prompted a decline in Bank of America
shares. The stock was down about 4% in midday trading Thursday,
underperforming the roughly 1% rise in the S&P 500.
Noninterest expenses in the first quarter were $15.52 billion,
up 15% from $13.48 billion a year earlier. The bank noted some
one-time expenses, including about $300 million from incentive
compensation changes and $160 million in severance. It also
mentioned higher costs associated with managing through the
"We're sitting here in the middle of the pandemic with a lot of
Covid expenses that have been a little bit more sticky than we had
all hoped, but they're going to come out," Chief Financial Officer
Paul Donofrio said on a call with analysts, many of whom asked
about the expenses.
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.
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
The bank now expects U.S. gross domestic product to return to
pre-pandemic levels by the third quarter of this year, Mr. Donofrio
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
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 lenders, Bank of America'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
Noninterest income rose 19% to $12.62 billion, from $10.64
billion a year earlier, helped by fees in its capital-markets
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% at JPMorgan.
A boom in mergers and stock offerings has 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 $22.82 billion, flat with
$22.77 billion a year earlier. Still, the result 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 for most banks at the end of
Write to Ben Eisen at email@example.com
(END) Dow Jones Newswires
April 15, 2021 12:24 ET (16:24 GMT)
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