Bank of America Traders Get Boost From Market Volatility, Beat Estimates

(Bloomberg) -- Bank of America Corp. joined Wall Street rivals in capitalizing on market volatility while also benefiting from an increase in lending. 

The company’s trading operation posted $4.72 billion in revenue, down just 7.1% from a year earlier after analysts expected a 16% decline. The best results were in the equities business, where revenue soared 9.5% to a record $2 billion, the Charlotte, North Carolina-based company said in a statement Monday.

Traders across the U.S. finance industry had a better-than-expected first quarter as Russia’s invasion of Ukraine compounded volatility already simmering on inflation concerns and a lingering pandemic. Goldman Sachs Group Inc. and Morgan Stanley posted surprise increases in trading revenue last week, while Citigroup Inc. and JPMorgan Chase & Co. also surpassed analysts’ expectations for quarterly results.

“Despite the market turmoil, we had zero days of trading losses,” Chief Executive Officer Brian Moynihan said on a conference call with analysts.

Read more: Wall Street Traders Reap Gains on Turmoil as Growth Fears Mount

Bank of America shares rose 2.6% to $38.55 at 9:53 a.m. in New York. They’ve declined 1.6% in the past 12 months, compared with a 4.5% decrease for the KBW Bank Index.

Net interest income rose 13% to $11.6 billion. The company’s loan balances rose to $993.1 billion at the end of the first quarter, up 10% from a year earlier and more than analysts’ estimates of $986.4 billion. Lending has been a key focus for investors, with government stimulus programs keeping demand weak for much of 2021 and historically low interest rates hurting net interest income, the revenue collected from loan payments minus what depositors are paid. But dwindling federal-aid programs and rising rates are starting to turn that around.

The increase in net interest income was “supported by strong loan and deposit growth,” Chief Financial Officer Alastair Borthwick said in the statement. “Going forward, and with the forward curve expectation of rising interest rates, we anticipate realizing more of the benefit of our deposit franchise.”

JPMorgan said last week that commercial loans rose and consumer loans excluding credit cards fell in the first quarter from a year earlier. At Wells Fargo & Co., credit-card, auto, personal and commercial loans all increased.

At Bank of America, investment-banking revenue fell 35% to $1.46 billion, while advisory fees totaled $473 million, up 18% from a year earlier. Wall Street’s dealmaking boom came to an abrupt halt amid gyrating markets and rampant inflation, cutting into fee revenue at banks. Debt-underwriting revenue fell 16% to $831 million, while equity underwriting slumped 75% to $225 million.

Bank of America also said its direct exposure to Russia is “minor,” disclosing around $700 million of lending to Russian-based companies. 

Also in Bank of America’s first-quarter results:

• Net income decreased 12% to $7.1 billion, or 80 cents a share. Adjusted earnings were expected to total 74 cents, the average estimate in a Bloomberg survey.
• Companywide revenue totaled $23.2 billion, meeting analysts’ estimates.
• Bank of America released $362 million in reserves in the first quarter. That follows a $851 million release in the previous three months.
• Noninterest expenses fell to $15.3 billion from $15.5 billion a year earlier. Executives said they expect costs to remain flat compared with a year earlier, and drop in future quarters.
• Client balances in the Merrill Lynch Wealth Management business rose 6.6% to $3.1 trillion.

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