BofA offers rosy revenue outlook as lending rebound boosts results

Bank of America gave a bullish income outlook because the second-largest US lender reported higher than anticipated earnings and dismissed recession issues heightened by the struggle in Ukraine.

The Charlotte-based financial institution expects web curiosity revenue, a carefully watched metric that measures the profitability of a financial institution’s deposits, to leap by about 20 per cent within the present quarter, fuelled by increased rates of interest and a lending rebound.

BofA, the final of the US megabanks to report earnings, was the one huge lender to announce a rise in income for the primary three months of the yr. Total income rose 2 per cent to $23.2bn, pushed by a 13 per cent improve in web curiosity revenue as loans jumped above pre-pandemic ranges for the primary time and the financial institution aggressively deployed deposits to purchase fixed-income securities. That was broadly in keeping with analysts’ expectations for $23.1bn.

However, web revenue fell 12 per cent in contrast with a yr in the past, when earnings have been boosted by a $2.7bn launch of credit score reserves that had been put aside to cowl pandemic-related mortgage losses that by no means materialised.

Overall, first-quarter revenue was $7.1bn, or 80 cents per share, in contrast with $8.1bn or, 86 cents per share, a yr earlier. Analysts polled by FactSet had forecast earnings of 75 cents per share.

Brian Moynihan, chief government, stated on a convention name with Wall Street analysts that deposit ranges remained elevated and credit score losses have been nonetheless close to historic lows, signalling that firms and shoppers had the capability to borrow extra.

Line chart of Balances indexed to end of 2019 levels showing BofA's loans rebounded while deposits remain high

“Could a slowdown in the economy happen? Perhaps,” he stated. “But right now, the size of the economy is bigger than pre-pandemic levels, consumer spending remains strong, unemployment is low and wages are rising.”

BofA reported earnings amid rising worries that the US may fall right into a recession as American shoppers take care of the quickest inflation charges in a era and the struggle in Ukraine roils the worldwide financial system.

However, BofA solely added $30mn in credit score provisions. At the tip of the quarter, the financial institution had about $700mn in loans excellent to firms in Russia. Alastair Borthwick, chief monetary officer, described its direct Russian publicity as “very minor”.

“All we’re really doing is helping our clients to unwind their existing contracts,” he advised reporters. “It’s simply not material to Bank of America.”

The financial institution’s double-digit web curiosity revenue development offset an 8 per cent decline in payment revenue pushed by a slowdown in funding banking. Trading income dropped 7 per cent, however got here in forward of analyst expectations owing to a report quarter for BofA’s equities division, the place revenues grew 9 per cent to $2bn.

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