Bank of America profits double after freeing up bad debt reserves
Bank of America Corp.
said his profit doubled in the first three months of the year after releasing the money he set aside for bad debts.
The Charlotte, North Carolina-based lender on Thursday reported first-quarter profit of $ 8.05 billion. That is compared to $ 4.01 billion a year earlier, when banks took big hits on their profits to start building up reserves for the rainy days at the start of the pandemic.
Bank of America made 86 cents a share, beating the 66 cents forecast in a FactSet analyst survey.
The profits of the largest banks reflect heightened optimism about an economic rebound. JPMorgan Chase & Co. and Wells Fargo & Co. said on Wednesday they both released money they raised last year to cover widespread defaults.
Bank of America said it freed up $ 2.7 billion from its reserves, increasing its bottom line. Imputations were down from a year earlier.
Like JPMorgan and Goldman Sachs Group Inc.,
the bank also profited from a crazy quarter on Wall Street. Higher trading income and investment banking fees helped boost profits.
Still, a surge in spending caused Bank of America shares to fall. The stock fell 2.9% on Thursday, underperforming the S&P 500’s more than 1% rise.
Non-interest spending in the first quarter was $ 15.52 billion, up 15% from $ 13.48 billion a year earlier. The bank noted some one-time expenses, including about $ 300 million from changes in incentive pay and $ 160 million in severance. He also mentioned higher costs associated with management during the pandemic.
“We are sitting here in the midst of the pandemic with a lot of Covid spending that has been a little stickier than we had all hoped for, but it’s going to come out,” CFO Paul Donofrio said on a call from analysts, including many asked about spending.
Bank stocks have been hot this year, rising more than the market as a whole after falling sharply when the coronavirus hit the United States last year.
Bank of America CEO Brian Moynihan has long expressed optimism about the economy, saying consumer spending is picking up.
“We believe that the progress of the health and economic crisis indicates an acceleration of the recovery,” 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, Donofrio said on a call with reporters.
A few months ago, GDP was expected to return to these levels before 2022. These forecasts help determine how much the lender is setting aside for bad debts.
But America’s second largest bank continues to weather the crisis, which has resulted in historically low rates. This has eroded the gap between what banks pay to borrow and what they get from loans. Net interest income totaled $ 10.2 billion in the first quarter, down 16% from $ 12.13 billion a year earlier.
Like other lenders, the Bank of America’s loan portfolio continued to contract, reflecting weak consumer and business demand. Outstanding loans and leases also fell 14% to $ 903.01 billion.
Non-interest income rose 19% to $ 12.62 billion from $ 10.64 billion a year earlier, on expenses from its financial markets activities.
Adjusted trading revenue rose 17% to $ 5.08 billion, from $ 4.34 billion a year earlier. By comparison, trading revenue increased 47% at Goldman and 25% at JPMorgan.
A boom in mergers and equity offerings has boosted investment banking divisions, especially those that work with specialist acquisition firms. Bank of America also benefited, mainly through equity issues. Investment banking fees rose 62% to $ 2.25 billion from $ 1.39 billion a year earlier.
In total, the bank’s revenue was $ 22.82 billion, stable at $ 22.77 billion a year earlier. Still, the result exceeded the $ 21.9 billion forecast by analysts.
The bank separately said its board of directors 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 June.
Write to Ben Eisen at [email protected]
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