Bank of America (BAC.N), opens new tab) topped forecasts on rising investment banking fees despite reporting a decline in first-quarter profit as the firm put aside more cash to cover soured loans.
Fall In Interest Payments
Though industry leaders have expressed cautious optimism, expectations of a nascent revival in deal making have been rekindled by a robust U.S. economy, strong markets, and a flurry of significant mergers.
Due to sluggish borrower demand, investment banking fees increased 35% to $1.6 billion in the reported quarter compared to the same period last year, somewhat offsetting a fall in interest payments.
Alastair Borthwick, the chief financial officer, predicted last month that investment banking income would increase by 10% to 15% in the first quarter.
Gains in the debt and equity capital markets drove boosted revenue from the category at competitor JPMorgan Chase (JPM.N), opens new tab, and Citigroup (C.N), opens new tab, in the first quarter.
LSEG figures show that Bank of America made 83 cents per share in the quarter that concluded in March, easily surpassing analysts’ average expectation of 76 cents per share, excluding one-time items.
Managing Exposure
Its sales and trading revenue increased by 2% to $5.2 billion, with a 15% increase from equities and a 4% decrease from fixed income currencies and commodities (FICC).
This quarter, “Bank of America’s sales and trading businesses continued their strong 2023 momentum, reporting the best first quarter in over a decade,” stated CEO Brian Moynihan.
In the first quarter of this year, Bank of America increased their provisions to $1.3 billion from $931 million the previous year.
Additionally, it took on greater write-downs for office loans, which contributed to a rise in its commercial division’s loan losses. However, the lender was cautiously managing its exposure to CRE, according to its CFO.
“We’ve got a pretty small exposure overall to a limited number of names and that allows us to go, name by name, through any non-performing loans, to just make sure we’re out in front of it,” Borthwick explained. The bank is examining transactions, property assessments, and ratings.
