Bank of America is a ballerBank of America’s first quarter has seen the dollars rolling in despite three months of crazy markets.
- BofA was up 3.4% on Monday after beating on both ends in Q1, though shares are still down nearly 6% this month. The bank reported EPS of $0.80 on revenues that were up a modest 1.8% at $23.33bn.
- Profits were down 12% but still beat estimates with $7.07bn thanks to the strong credit quality of its borrowers. Net loan charge-offs (when borrowers fall behind on payments) fell 52% to $392m, which is less than half of what analysts expected. Other big banks like JPMorgan reported much bigger profit declines of over 40%.
- Big bank stocks have been struggling this year as concerns grew that high inflation and the war in Ukraine will spark a recession, which could mean higher defaults, but CFO Alastair Borthwick said the better-than-expected earnings reflect the value of the brands “Responsible Growth” strategy.
Bank of America
BofA's big quarterBank of America earns a gold star sticker for its Q4 earnings report, but a worrying market forgets to give it due praise.
- The stock opened up nearly 5% on Wednesday morning, but lost momentum (along with most of the market) to close up only 0.4%
- It topped earnings expectations with EPS of $0.82 compared to the $0.76 analysts expected. Though revenue of $22.17bn was up 10%, it just missed forecasts for $22.2bn.
- Profit was the star of the show, up 28% to hit $7.01bn from $5.47bn this time last year, thanks to record revenues from its wealth management and investment banking division.
- Like its other banking brother, the company faced higher expenses thanks to having to pay higher wages for its employees – others like Goldman Sachs (GS) didn’t cope as well with the costs.
- Its trading revenue wasn’t as lucky, seeing a 2% decrease as the trading frenzy of earlier in the year faded in a big way.
- Big banks tend to do better in high-interest environments, so BofA is expecting another profitable year as the Fed seems set to execute four rate hikes.
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