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BANK OF AMERICA (BAC)
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BofA profit beats estimates on higher interest rates, loan growth

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04/16/2018 | 03:28pm CEST
FILE PHOTO: A Bank of America sign is displayed outside a branch in Tucson, Arizona

(Reuters) - Bank of America (>> Bank of America) reported a 34 percent rise in first-quarter profit on Monday, topping Wall Street estimates, as the lender benefited from higher interest rates and growth in loans and deposits.

(Reuters) - Bank of America reported a 34 percent rise in first-quarter profit on Monday, topping Wall Street estimates, as the lender benefited from higher interest rates and growth in loans and deposits.

Revenue rose at three of BofA's four major businesses. In consumer banking, its biggest business, revenue increased 9 percent as higher interest rates helped BofA charge more for loans while keeping deposit rates low.

Profit also got a boost from Chief Executive Officer Brian Moynihan's efforts to cut costs as well as lower tax expenses following President Donald Trump's sweeping overhaul of the U.S. tax code.

Shares of the second-largest U.S. bank by assets rose 1 percent in premarket trading. They have gained 33 percent in the past 12 months, but fell about 3 percent along with other U.S. banks on Friday.

"Strong client activity, coupled with a growing global economy and solid U.S. consumer activity, led to record quarterly earnings," Moynihan said in a statement.

BofA's net interest income rose 5 percent in the first quarter, pushing total revenue up 4 percent to $23.28 billion (16.28 billion pounds). The lender relies heavily on higher interest rates to maximize profits as it has a large stock of deposits and rate-sensitive mortgage securities.

Total loans and leases rose 3 percent, while total deposits increased 4.4 percent.

The only business to record a fall in revenue was global banking, hurt by lower investment banking fees.

Non-interest expenses declined 1 percent, while income tax expenses fell about 26 percent.

The bank's efficiency ratio, a closely watched measure of revenue divided by expenses, was 60 percent in the first quarter, down from 63 percent a year earlier. A low ratio indicates a bank is more efficient.

Jefferies analysts said BofA results looked best among peers that have reported so far.

The bank, however, underperformed in fixed income, currency and commodities (FICC) trading because of a decline in bond issuance from corporations, Chief Financial Officer Paul Donofrio said on a call with journalists. Less bond issuance can, in turn, affect credit trading in secondary markets.

Trading revenue was up only 1 percent. Equities trading revenue, excluding items, rose 38 percent, while revenue from trading fixed income fell 13 percent.

BofA's trading results mirrored those of rivals JPMorgan Chase & Co (>> JP Morgan Chase & Company) and Citigroup Inc. Revenue from stock trading rose at both the banks, but weakness in bond trading crimped total trading revenue growth.

Net income attributable to shareholders rose to $6.49 billion from $4.84 billion a year earlier. Earnings per share rose to 62 cents, beating the average analyst estimate of 59 cents, according to Thomson Reuters I/B/E/S.

(Reporting by Sweta Singh in Bengaluru and Elizabeth Dilts in New York; Editing by Saumyadeb Chakrabarty)

By Sweta Singh and Elizabeth Dilts

Stocks mentioned in the article
ChangeLast1st jan.
CITIGROUP 1.88% 70.28 Delayed Quote.-7.30%
JP MORGAN CHASE & COMPANY 2.20% 111.72 Delayed Quote.3.06%
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Financials ($)
Sales 2018 92 792 M
EBIT 2018 38 294 M
Net income 2018 26 029 M
Debt 2018 -
Yield 2018 1,99%
P/E ratio 2018 11,63
P/E ratio 2019 10,27
Capi. / Sales 2018 3,26x
Capi. / Sales 2019 3,11x
Capitalization 302 B
Chart BANK OF AMERICA
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Bank of America Technical Analysis Chart | BAC | US0605051046 | 4-Traders
Technical analysis trends BANK OF AMERICA
Short TermMid-TermLong Term
TrendsBearishNeutralBullish
Income Statement Evolution
Consensus
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Mean consensus OUTPERFORM
Number of Analysts 31
Average target price 34,3 $
Spread / Average Target 16%
EPS Revisions
Managers
NameTitle
Brian T. Moynihan Chairman, President & Chief Executive Officer
Catherine P. Bessant Co-COO & Chief Technology Officer
Thomas Kell Montag Co-Chief Operating Officer
Paul M. Donofrio Chief Financial Officer
Thomas J. May Independent Director
Sector and Competitors
1st jan.Capitalization (M$)
BANK OF AMERICA1.76%302 496
JP MORGAN CHASE & COMPANY3.06%372 827
INDUSTRIAL AND COMMERCIAL BANK OF CHINA-6.61%327 191
CHINA CONSTRUCTION BANK CORPORATION-4.30%271 591
WELLS FARGO-16.65%245 706
BANK OF CHINA LTD-4.79%212 720