Wall Street units drive BofA’s 1Q profits

Bank of America’s traders and investment bankers reaped another windfall, joining their Wall Street rivals in capitalizing on the stock market’s wild ride this year.

Revenue from sales and trading rose 17% in the first quarter, a bigger jump than expected, while equity underwriting fees more than tripled. The results echo blockbuster profits at JPMorgan Chase and Goldman Sachs, which benefited from increased trading amid stock-market volatility and a flurry of activity by blank-check companies.

As the COVID-19 pandemic drags on, U.S. banking giants have remained resilient. Their Wall Street operations picked up the slack for other divisions, bringing in deal fees and activity from clients who were reacting to financial-market gyrations. Main Street units fared worse, as millions of Americans lost their jobs and businesses were shuttered. But there are some indications that consumers are starting to spend again as the vaccine rollout and stimulus efforts help the economic recovery pick up steam.

”While low interest rates continued to challenge revenue, credit costs improved and we believe that progress in the health crisis and the economy point to an accelerating recovery,” CEO Brian Moynihan said in a statement Thursday.

Bank of America’s fixed-income traders delivered a 22% climb in revenue, while its stock desks saw a 10% increase. The overall jump didn’t reach the blowout numbers that JPMorgan and Goldman Sachs announced yesterday, but the bank’s total haul of $5.1 billion beat analysts’ $4.37 billion forecast.

Investment banking fees surged more than 60% to $2.25 billion, led by a surge in equity-underwriting fees to $900 million.

Noninterest expenses rose 15% to $15.5 billion, driven by costs linked to COVID-19, compensation changes and charges for shrinking the bank’s real estate footprint.

“We saw strong growth in our capital markets and wealth management businesses, which allowed us to absorb additional expenses,” Chief Financial Officer Paul Donofrio said in the statement.

The bank’s net interest income, or revenue from customer loan payments minus what the company pays depositors, decreased 16% to $10.2 billion. Loans in the consumer banking unit dropped 8%.

The bank joined rivals in releasing reserves as the worst-case pandemic scenarios didn’t play out. It released $2.7 billion from its stockpile last quarter after stashing away more than $11 billion last year to cover loans likely to sour.

Net income rose to $8.05 billion from $4.01 billion a year earlier. It exceeded the $6.25 billion estimate of 13 analysts. Per-share earnings of 86 cents beat analysts’ 66-cent forecast.

Total revenue increased slightly to $22.8 billion.

Bank of America also said Thursday that it plans to boost its capital returns once restrictions from the Federal Reserve are lifted. The bank’s board authorized $25 billion of stock buybacks over time.

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