NEW YORK – Bank of America posted a 12% decline in first-quarter profits from a year earlier, a decline that was much less than the ones its rivals reported the previous week.
The nation’s second-largest bank was helped by higher net interest income and very modest exposure to Russian assets.
The Charlotte, North Carolina-based bank said it earned a profit of $7.1 billion, or 80 cents a share, compared with a profit of $8.05 billion, or 86 cents a share, in the same period a year earlier.
The results were better than analysts had forecast, according to FactSet.
While BofA’s profits fell, just as they did for the other big five Wall Street banks this quarter, its results were helped by several factors .
Bank of America saw net interest income increase 13% in the quarter, roughly $1.4 billion.
BofA’s balance sheet is more skewed to bonds with shorter maturities, so short-term moves in interest rates tend to quickly impact the bank’s bottom line.
BofA’s consumer banking division, the bank’s largest business by revenue and profits, also helped boost results. Net income in the division was up 11% from a year earlier, helped by higher revenue from loans and interest rates.
Deposits also grew noticeably, up 14%, to $1.06 trillion.“This is not a bad result for Bank of America, particularly the continued solid loan growth,” said David Wagner, portfolio manager at Aptus Capital Advisors, who owns BofA shares, in an email.
The bank did not have to set aside much funds this quarter to cover potential losses as well, in contrast to JPMorgan Chase and Citigroup, who had to set aside money to cover the risk of a recession as well as for their exposures to Russia.
BofA said it had roughly $700 million in total in exposure to Russia, compared with the $1.9 billion Citigroup had to set aside to cover just potential losses.
Wagner thinks it’s possible BofA may have to raise its credit reserves later this year.
JPMorgan was aggressive in reserving for loan losses in the pandemic, and seems to be doing so again now with inflation making it likely the Federal Reserve has to aggressively raise rates.
Banks only (reserve for losses) when they think that default rates, which are currently low, will start to rise.
And JPMorgan admitted to such during the call, saying it was a ‘preemptive move’ if the economy slowed.”
Like other banks, BofA saw a drop in investment banking revenues and fees in the quarter as businesses refrained from deal-making due to market volatility. Trading revenues were down in the quarter, also due to market volatility.
Local journalism is essential.
Give directly to The Spokesman-Review's Northwest Passages community forums series -- which helps to offset the costs of several reporter and editor positions at the newspaper -- by using the easy options below. Gifts processed in this system are not tax deductible, but are predominately used to help meet the local financial requirements needed to receive national matching-grant funds.
Subscribe now to get breaking news alerts in your email inbox
Get breaking news delivered to your inbox as it happens.