BofA Shares Drop With Wall Street Analysts Lukewarm on Results

(Bloomberg) -- Bank of America Corp. shares are down as much as 1.1 percent in mid-morning trading, after the bank reported record first-quarter profits, helped by cost-cutting and after Chief Executive Officer Brian Moynihan flagged "solid U.S. consumer activity." Analysts, however, were a bit cool on the quarter, with several noting that low provisions and better tax rates drove the beat versus estimates, while loan growth was disappointing. The bank also stopped reporting fees from its once giant mortgage business.

Other banks are mixed in morning trading, with JPMorgan Chase & Co. up as much as 1.1 percent; Citigroup Inc. down as much as 1.4 percent, and Wells Fargo down as much as 1.1 percent; all three fell after reporting on Friday. The KBW bank index is paring gains of as much as 0.8 percent. Goldman Sachs and Morgan Stanley, which both report results later this week, are higher in early trade.

Here’s a sample of Wall Street commentary:

KBW, Brian Kleinhanzl

BAC results were "mixed," as lower taxes and provision expense drove the beat, while revenues and expenses "washed." With investors’ fears focused on deposit betas and loan growth, 1Q deposit betas were better but average loan growth missed, while end-of-period loan growth was better. Kleinhanzl notes BAC beat on expenses, though "if loan growth doesn’t materialize then expenses may not matter."

Goldman Sachs, Richard Ramsden

Results were "moderately better on NII growth, benign credit." Ramsden notes core revenues were up 3% y/y, while core expenses expanded 1%, with the efficiency ratio dropping below 60% for the first time in 1Q post-crisis. The benefit from the December rate hike and a steeper long end was offset by slightly weaker loan growth.

Baird, David George

1Q was "largely in line," as lower-than-est. provisioning and slightly higher fees offset higher expenses. "Investor expectations were rising for the market-sensitive banks, but results today look solid and consistent with recent trends," George says.

Nomura Instinet, Steven Chubak

"While revenues and credit continue to surprise positively vs Street expectations, the setup here is a bit tricky, as BAC remains a popular long and the results can best be described as ’good, not great.’"

Atlantic, John Heagerty

"This looks like a good result at the operating level but the 5% EPS beat perhaps flatters the numbers," as the 5% adj. EPS beat was driven by lower provisions and a low effective tax rate.

--With assistance from Kimberly Yuen Gilbert Xu (Bloomberg Global Data) and Joelle Kruczek (Bloomberg Global Data).

To contact the reporter on this story: Felice Maranz in New York at fmaranz@bloomberg.net.

To contact the editors responsible for this story: Arie Shapira at ashapira3@bloomberg.net, Brad Olesen

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