Coming off a rough day for Goldman and Citi whose reports did not impress the market and with JPMorgan now increasingly looking like the outlier when it comes to bank earnings, Bank of America is up.
The headline numbers look somewhat decent, but after Monday, you’ve got to wonder if it will be enough. 1Q revenue net of interest expense was $23 billion – that’s just a shade below estimates ($23.16 billion). The range was $22.59 billion to $23.71 billion. 1Q EPS was $0.70, up 13% and well ahead of estimates. Non-interest expense fell 4% to $13.2 billion.
Net interest yield was 2.51%, up 9bp from Q1 2018. That’s above consensus but basically in the middle of the range. Net interest income of $12.4 billion rose $0.6 billion from the first quarter of last year. The bank cites “the benefits from higher interest rates as well as loan and deposit growth.” They note only “modest” loan spread compression. “A +100 bps parallel shift in the yield curve is estimated to benefit NII by $3.7 billion over the next 12 months, driven primarily by sensitivity to short-end interest rate”, the bank continues.
In Q4, BofA suffered the same FICC fate as most of the rest of the street. FICC trading at BofA dove 15% last quarter to $1.4 billion, well worse than what folks were expecting. The bank blamed lackluster client activity and, predictably, weak credit markets. In Q1, FICC trading revenue was $2.36 billion, down 8% versus the first quarter of 2018. That looks to have beaten estimates of $2.27 billion, so that’s decent news. The bank unsurprisingly cited “lower client activity across most businesses” compared to last year.
Equities trading, on the other hand, looks to have disappointed after a decent Q4. Equities revenue in Q1 was $1.19 billion, down 22% from the year earlier quarter. That missed consensus $1.21 billion, slightly. BofA notes the obvious, which is that Q1 2018 “benefited from higher client volumes and a strong performance in derivatives on elevated market volatility.” What did we say on Friday and also on Monday? Volatility is a gift and curse for banks.
Overall, trading revenue was $3.5 billion, down 17% YoY.
Of course BofA doesn’t depend as much on trading – they’ve obviously got the consumer franchise which comprises a sizable percentage of overall revenue. Net income of $3.2 billion there represented a 25% jump YoY. Revenue was up 7% to $9.6 billion driven by NII (think: higher interest rates and deposit growth).
IB revenue was $1.3 billion, that’s basically in line after beating in Q4. Apparently, debt and equity underwriting were somewhat lackluster.
Non-interest expenses rose sequentially. Total net charge-offs ($1.0 billion) jumped $67 million from Q4 and $80 million from Q1 2018.
All in all, one doubts this is going to be “enough”, although at first glance, the consumer business numbers do look good. The shares are essentially flat in the premarket.
The Presentation Materials (2) Q1_2019_Bank_of_America_Financial_Results_Press_Release
