Bank of America turned in a decent set of quarterly results Monday, and said it expects mortgage growth to be “good” in the coming quarters, but the shares may face an uphill battle.
Big bank earnings are notoriously difficult to trade. At times, it feels like financials are condemned to a “sell the news” dynamic — irrespective of whether the news is good or bad.
Like the rest of Wall Street, BofA benefited from solid trading results. FICC revenue of $2.71 billion topped estimates, albeit not by a huge margin. Equities revenue of $2.01 billion beat handily, thanks to robust client activity and strength in derivatives.
Overall, trading revenue of $4.72 billion was down 8%, but the market expected a larger decline.
Last week, Goldman, Morgan Stanley, JPMorgan and Citi all posted solid trading results. At first glance, the figure (above) suggests uneven performance but, again, note that trading results were uniformly better than estimates due in part the war-related volatility.
BofA missed the mark in IB. Revenue of $1.5 billion was short of the $1.67 billion analysts expected. The breakdown was a carbon copy of peers’ results. Advisory was strong (record fees in Q1) but equity underwriting suffered from the same “standstill” seen across the Street. Equity fees were $225 million, down from $900 million in Q1 2021.
The bank cited an “industry-wide” retreat in underwriting activity from record levels observed last year. The figure (above) underscores the point.
Elsewhere for BofA, NII was $11.68 billion, slightly below estimates, wealth management revenue beat and loans were 10% higher to $993.1 billion, ahead of the $986 billion consensus expected. New residential mortgage originations fell sharply from Q4 and at $16.4 billion, were the lowest in a year.
“Net interest income increased by $1.4 billion versus the year-ago quarter supported by strong loan and deposit growth,” CFO Alastair Borthwick remarked. “Going forward, and with the forward curve expectation of rising interest rates, we anticipate realizing more of the benefit of our deposit franchise.”
The bank described its direct exposure to Russia as “very minor.” EPS beat and firmwide revenue was in line.
All in all, I doubt anyone cares too much. With all due respect, I can’t remember a recent quarter when anyone was truly excited, one way or the other, about Bank of America’s results. As one analyst put it Monday, “BofA continues to chug along.”
And with that, the book closed on big bank earnings. Golf clap.
