BofA's first-quarter profit fell sharply, weighed down by a decline in net interest income and a surge in commercial real estate losses.
Before the U.S. stock market on Tuesday, April 16, Bank of America (BAC) announced its results for the first quarter ended March 31. According to the financial report, Bank of America's first-quarter revenue was $25.8 billion, exceeding expectations of $25.46 billion, down 2% year-on-year, net profit fell 18% year-on-year to $6.67 billion, and adjusted earnings per share were 83 cents, exceeding expectations of 77 cents.
After the earnings report, BofA shares fell more than 2% in pre-market trading, and then turned higher, and are now up 2.9%.
Bank of America CEO Brian Moynihan said in the earnings report:
"Our business performed well during the quarter, adding customers and deepening our relationships. We reached 36.9 million consumer checking accounts, marking the 21st consecutive quarter of net checking account growth. Our wealth management team generated record revenues, client balances hit record highs, and our investment banking business rebounded. ”
"Bank of America's sales and trading business continued its strong momentum in 2023 during the quarter, reporting its best first-quarter results in more than a decade. ”
Net interest income continued to decline, and the stock trading business hit a record high
Bank of America's net interest income continued to decline, falling by $400 million to $14.19 billion, down 3% year-on-year, as financing costs rose in line with rising interest rates, becoming the main reason for the sharp decline in BofA's profit in the quarter.
In terms of segments, the revenue of the consumer banking division in the first quarter was US$10.166 billion, the revenue of the global wealth and investment division was US$5.59 billion, a year-on-year increase of 5%, achieving growth for 21 consecutive quarters, and the revenue of the global banking and markets division was US$5.98 billion and US$5.88 billion, respectively, and investment banking expenses increased by 35% year-on-year to US$1.6 billion.
By business, FICC (fixed income, foreign exchange and commodities) revenue fell 6% year-over-year to $3.2 billion, mainly driven by a weak macro product trading environment, partially offset by improved mortgage transactions, while investment banking revenue jumped 35% above expectations to $1.57 billion versus $1.36 billion expected.
Equity revenue rose 14% to $1.9 billion, one of the best quarters on record, driven by strong derivatives trading performance.
Notably, BofA's charge-offs surged to $1.5 billion in the first quarter, and non-performing loans reached $5.9 billion, an increase of $0.4 billion sequentially, mainly driven by commercial real estate.
Analysts warn that while BofA's earnings report for the quarter mostly beat expectations, it is "only a matter of time" before commercial real estate and credit card exposures begin to show significant losses.
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