BofA offers upbeat revenue outlook as loan rebound boosts results
Bank of America gave a bullish earnings outlook as the second-largest US lender reported better-than-expected earnings and brushed aside recession fears heightened by the war in Ukraine.
The Charlotte-based bank expects net interest income, a closely watched metric that measures a bank’s deposit profitability, to jump about 20% in the current quarter, fueled by rates higher interest rates and a rebound in lending.
BofA, the latest of America’s megabanks to report profits, was the only major lender to report an increase in revenue for the first three months of the year. Total revenue rose 2% to $23.2 billion, driven by a 13% increase in net interest income as lending exceeded pre-pandemic levels for the first time and the bank aggressively deployed deposits to buy fixed income securities. That was broadly in line with analyst expectations for $23.1 billion.
However, net profit fell 12% from a year ago, when profits were boosted by a release of $2.7 billion in credit reserves that had been set aside to cover losses on pandemic-related loans that never materialized.
Overall, first-quarter profit was $7.1 billion, or 80 cents per share, from $8.1 billion, or 86 cents per share, a year earlier. Analysts polled by FactSet had forecast earnings of 75 cents per share.
Brian Moynihan, chief executive, said in a conference call with Wall Street analysts that deposit levels remained high and credit losses were still near historic lows, signaling that businesses and consumers had the capacity to borrow more.
“Could a slowdown in the economy happen? Maybe,” he said. “But right now the size of the economy is larger than pre-pandemic levels, consumer spending remains strong, unemployment is low and wages are rising.”
BofA reported earnings amid growing fears the US could slide into a recession as US consumers face the fastest inflation rates in a generation and war in Ukraine rattles the global economy .
However, BofA only added $30 million in credit provisions. At the end of the quarter, the bank had about $700 million in loans outstanding with businesses in Russia. Alastair Borthwick, chief financial officer, described his direct exposure to Russia as “very minor”.
“All we really do is help our customers unwind their existing contracts,” he told reporters. “It’s just not important to Bank of America.”
Double-digit growth in the bank’s net interest income offset an 8% decline in commission income driven by a slowdown in investment banking. Trading revenue fell 7% but beat analysts’ expectations thanks to a record quarter for BofA’s equity division, where revenue rose 9% to $2 billion.