Bank of America delivered what Brian Moynihan described as “exceptional results” on Thursday.
A decrease in the the firm’s credit loss provision provided a tailwind. The reserve release was $2.7 billion and came “amid an improved macroeconomic outlook and balance declines,” BofA said. Net income was $8.1 billion, more than double Q1 2020. EPS was $0.86.
I’ll confess that a scan of the results left me a bit skeptical on Moynihan’s “exceptional” characterization. Revenue was essentially flat YoY, for example, at $22.8 billion and loans were down 8% (figure below).
Like JPMorgan and Goldman, BofA’s traders appear to have delivered. FICC revenue of $3.25 billion was up 22% and easily better than the $2.73 billion consensus was looking for. In equities, revenue of $1.83 billion was a slight beat. Overall, trading revenue of $5.08 billion was comfortably ahead of the $4.37 billion estimate, but I’d venture that the 10% gain in equities wasn’t particularly impressive. IB fees surged 62%, thanks to record equity underwriting.
The bank’s net interest yield was 1.68%, down 3bps sequentially. Excluding Global Markets, it was stable at 1.90%. Lower loan balances and lower rates led to a decline in NII and noninterest expense jumped 15% thanks to “elevated net COVID-19 costs.”
Net charge-offs fell, and are down markedly over the last several quarters, but BofA did note that Consumer net charge-offs rose due to the expiration of deferrals. I’m sure that was expected, but it’s worth noting. They were still down $179 million from Q1 2020.
Deposits rose 25% to $1.8 trillion.
“While low interest rates continued to challenge revenue, credit costs improved and we believe that progress in the health crisis and the economy point to an accelerating recovery,” Moynihan went on to say Thursday.
It seems to me that the takeaway from BofA’s results is the simple figure (below).
Moynihan will do a lot of talking on Thursday, so I’m not sure quoting the perfunctory statement from the press release is very useful, but nevertheless, he submitted that the bank is well positioned to perform in an environment characterized by a strong recovery.
I suppose I’d just quip that it doesn’t take a management genius to perform when things are going well.
The bank did announce a buyback, but at least one analyst said that “can be ignored” as it’s “simply the board increasing the open-ended authorization [while] actual capital return is limited by the Fed and the stress-test process.”
Draw your own conclusions.
Read more:
JPMorgan Results Overshadowed By Dimon’s ‘Challenged’ Loan Demand
