Last week’s big bank results suggested America’s largest financial institutions fared well in the first quarter, and even benefited from the dynamics which bedeviled some smaller players.
On Tuesday, Bank of America underscored the point, reporting a 25% rise in net interest income and trading results that handily topped estimates.
NII was $14.6 billion in Q1, ahead of the bank’s guide from last quarter. Sequentially, NII slipped, as lower deposits and two fewer accrual days offset higher rates. Margins were a couple of basis points lower versus Q4, but rose 51bps from the same period a year ago.
Last quarter, Alastair Borthwick was somewhat cautious on the outlook for NII. The bank wanted to “stay patient,” he said.
Loans rose 7%, both overall and in consumer, where deposits dropped 2% from Q4 but remained above $1 trillion. The bank was keen to point out that, while well off the highs, deposits are a mile above Q4 2019 levels (34% overall and 43% in consumer).
On a Tuesday media call, Borthwick said BofA was “surprised by deposits” headed into Q1. There’s pressure to raise rates as competition heats up, he went on, describing “pretty good deposit gathering” towards the end of the quarter. BofA can “take deposits very, very quickly,” Borthwick remarked. Deposits are sticky in consumer, but the bank’s wealth management customers are seeking out higher-yielding products. Checking account balances are still above pre-COVID levels.
Notable, perhaps, was a $360 million net reserve build in consumer tied to “higher-than-expected credit card balances.” Consumer charge-offs rose $313 million, again attributable to credit cards. Although charge-offs are double levels from a year ago (both on an absolute basis and as a percentage), they’re still below pre-pandemic levels. Put differently: Things appear to be normalizing, for better or worse.
Overall, Borthwick described the bank’s results as “strong despite a challenging economic environment with market and banking sector volatility.”
The volatility he mentioned (or, more precisely, the volatility engendered by that volatility) helped BofA’s traders to “one of our best quarters” ever, as Borthwick described the $5.05 billion trading haul, anchored by a huge FICC beat.
FICC revenue of $3.43 billion rose 27% and was $800 million ahead of consensus. Recall that JPMorgan and Citi both turned in impressive FICC beats for Q1. BofA cited “improved performance across mortgage, credit and municipal products.”
Between them, JPMorgan, Citi and BofA raked in $13.6 billion in FICC revenue last quarter, 14% more than consensus expected.
Other notables from America’s second-largest bank included a quarter billion dollar pretax loss on the sale of securities from the AFS book, higher non-interest expenses, a miss in wealth management revenue, higher headcount versus a year ago, 13% top-line growth and EPS of $0.94, up 18% YoY.
Generally speaking, it was a decent quarter. Markets may focus on evidence of deterioration in consumer, but as Borthwick put it, BofA “hasn’t seen cracks” in the consumer portfolio yet. Americans are spending more and balances remain high, he told reporters.
For his part, Brian Moynihan offered a straightforward assessment: “Every business segment performed well.”
