Bank of America joined JPMorgan Chase & Co. and Goldman Sachs to report another great quarter. Revenues and earnings were led higher by robust trading and retail consumer banking income, helped by market volatility, lower interest rate expense, and a well-diversified business portfolio built over the last three decades.
Earnings per share rose to $0.90 from $0.76, while revenue increased 6 percent year over year, to $27.4 billion.
That’s thanks to several favorable factors that boost financial results across all business segments, such as lower deposit costs, higher non-interest income (NII) related to global markets activity, and fixed-rate asset repricing, partially offset by the impacts of lower interest rates and two fewer days of interest accrual.
Global markets posted net income of $1.9 billion on $5.7 billion in revenue, up 11 percent from a year earlier.
Global wealth and management reported net income of $1 billion on $6 billion in revenues, up 8 percent from the previous year. This was driven by a 15 percent jump in asset management fees because of rising assets under management. Client balances reached $4.2 trillion, up 5 percent from the previous year, due to positive net client flows and higher market valuations.
Retail banking reported net income of $2.5 billion on revenue of $10.5 billion, up 3 percent from a year earlier. In addition, combined credit and debit card spending reached $228 billion, an increase of 4 percent.
Bank of America CEO Brian Moynihan highlighted the exceptional performance of the company’s sales and trading businesses, which delivered their 12th consecutive quarter of year-over-year revenue growth.
“Our business clients have been performing well, and consumers have shown resilience, continuing to spend and maintaining healthy credit quality,” he said.
“Though we potentially face a changing economy in the future, we believe the disciplined investments we have made for high-quality growth, our diverse set of businesses, and the team’s relentless focus on responsible growth will remain a source of strength.”
CFO Alastair Borthwick pointed to the consistent growth of the company’s retail banking, with average deposits growing for the seventh consecutive quarter to nearly $2 trillion.
“Asset quality remained stable, reflecting years of responsible lending, while our strong capital and liquidity levels allowed us to support our client’s growth and return $6.5 billion to shareholders,” he said.
“We run our business in a manner intended to withstand volatility for the long term. And through our capabilities, relationships and financial flexibility, we believe we are well-positioned to continue delivering for our clients and shareholders.”
Georgios Koimisis, an associate professor of economics and finance at Manhattan University, told The Epoch Times that Bank of America’s first-quarter results show that “consumer spending remained healthy.”
Meanwhile, “trading revenues hit new highs, and wealth management showed strong asset growth,” he said. “Digital banking activity also continued to rise.
“Deposits increased for the seventh straight quarter, reflecting continued customer confidence. Shareholder returns were also robust.”
Bank of America is among the oldest U.S. banks, established more than a century ago in San Francisco, and has grown into a multinational bank and financial holding company, thanks to numerous acquisitions in the 1980s. In 1998, it was acquired by the Charlotte-based NationsBank, but retained the name Bank of America.
The new entity continued its acquisition spree, culminating in two high-profile acquisitions—Countrywide Financial and Merrill Lynch—during the financial crisis of 2008–09.
In the short term, these two acquisitions became a liability for the financial giant.
The purchase of a fast-growing mortgage finance company like Countrywide Financial was supposed to be the quick ticket into the mortgage market, a promising business to expand for banks with rising deposits. However, it became a liability, as Bank of America paid a too-high acquisition price, and the mortgage finance company became the poster child for the excess in the mortgage market during the preceding years.
The purchase of Merrill Lynch was supposed to be the quick ticket to expanding into another market: investment banking and wealth management. But this move also fell short: Merrill Lynch came with significant liabilities and an aggressive culture that clashed with Bank of America’s more conservative approach.
These problems eventually faded, leaving Bank of America as a well-diversified financial powerhouse. It now reaps the benefits of synergies across its business segments and the advantages of a larger organization.
Koimisis is concerned about a couple of areas. One is investment banking, where banking fees have declined slightly. He believes this weakness reflects a slowdown in deal activity, likely driven by global uncertainty and geopolitical tensions.
Another is on the credit side. The provision for loan losses was slightly better than expected, suggesting that credit quality remains stable.
“Yet, the bank continues to build reserves in anticipation of possible rising defaults if the economy worsens later this year,” Koimisis said.
