Bank of America (BofA) has reported a fall in profit during the first quarter as its income from interest payments dropped, although the blow was cushioned by improved trading from its dealmaking and wealth management arms.
The second-largest US bank by assets posted a profit of $6.7bn (£5.38bn), or 76 cents per share, for the three months of 2024, down 18 per cent from $8.2bn (£6.59bn), or 94 cents per share, during the same period last year. Its profit and revenue figures topped analysts’ estimates.
BofA’s net interest income – the gap between what it earns from interest on loans and pays out to savers – fell three per cent to $14bn.
Banks are facing narrower margins as the US Federal Reserve has pencilled three interest rates this year, while a worse economic picture means customers may be less confident to borrow money.
However, recent economic data has led traders to bet that the central bank will keep borrowing costs higher for longer, giving lenders the chance to build on bumper profits seen last year.
The fall in interest income was partly offset by higher revenue from BofA’s investment banking and wealth management businesses, with total investment banking fees up 35 per cent at $1.6bn (£1.29bn).
BofA’s finance chief Alastair Borthwick told analysts last month that the bank was expecting a rise in investment banking revenue of between 10 per cent to 15 per cent year on year.
Wall Street rivals JPMorgan Chase, Citigroup and Goldman sachs have also seen a boost from a pickup in dealmaking and equity capital markets activity since last year.
BofA took a $700m (£562.3m) charge to refill the government’s deposit insurance fund, which was drained by $16bn last year to cover depositors affected by the regional banking crisis including the collapse of Silicon Valley Bank.
BofA’s chair and chief executive Brian Moynihan said on Tuesday: “We reported a strong quarter as our businesses performed well, adding clients and deepening relationships. We reached 36.9m consumer checking accounts, with 21 consecutive quarters of net checking account growth.
“Our Wealth Management team generated record revenue, with record client balances, and investment banking rebounded. Bank of America’s sales and trading businesses continued their strong 2023 momentum this quarter, reporting the best first quarter in over a decade.
“Continued strong earnings and strong expense management both position our company to continue to drive our market leading positions across our businesses.”