Bank of America Tops Q1 Analysts’ Views as Investment and Trading Banking Fees Soar

By Luigi Wewege Thursday, April 15, 2021

Bank of America (BAC) reported better-than-expected earnings for Q1 after witnessing an extremely strong performance of its investment and trading business sector.

Bank of America sign.

Bank of America Joins JP Morgan and Goldman Sachs in Delivering Big Time

Bank of America shares gained over 1% in the pre-market trading session Thursday after the second-largest US bank by assets easily exceeded analysts’ estimates for Q1.

The banking company said it recorded a profit of $0.86 per share, or $8.1 billion, to easily beat the $0.66 expected from Wall Street. Business revenues were reported at $22.9 billion vs. $22.1 billion estimates from the surveyed analysts.

Chairman and CEO Brian Moynihan said in a statement that the company recorded “exceptional results” on the back of the record or near-record levels of deposits, investment flows, investment banking revenue, digital users, and client engagement.

"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. The strength of our balance sheet, our complementary and diverse set of businesses, and our talented teammates position us to perform well in that environment,” Moynihan said in a statement sent to clients.

Like its key rivals, JP Morgan and Goldman Sachs, Bank of America also released a portion of reserves set aside for bad loans to further boost its profits. The banking company said it released $2.7 billion in reserves from $11.3 billion reserved for credit losses last year when the company prepared for a wave of defaults amid the COVID-19 pandemic.

In addition to loan reserves, Bank of America produced a beat across the board. Its fixed-income trading business unit saw its revenue soar by 22% to $3.3 billion to top the analysts’ estimates by $660 million.

Business revenues from equities trading was up 10% to $1.8 billion, higher than the $170 million Wall Street was calling for. While all business sectors record better-than-expected performance, one unit excelled.

The investment banking business sector witnessed a 62% jump in fees generated to $2.2 billion to smash analysts’ expectations of just over $1.8 billion. A stellar performance was fueled by a 218% jump in equity underwriting fees to $900 million.

On the back of a strong Q1 performance, the banking company said it will look to return some profits to its shareholders through the stock buyback program. The board of directors has authorized the repurchase of up to $25 billion of common stock over time, the company said in a statement.

“This authorization reflects the company’s commitment to return to shareholders excess capital that is not needed to support economic growth, deliver for customers and communities, invest in the future and sustain strength and stability through the cycle,” Bank of America said.

Summary

In one of its best quarters in a recent decade, Bank of America posted stronger-than-expected results across the board, fueled by the release of $2.7 billion of cash reserved for bad loans and a booming performance of its investment and trading business sectors.

About the Author


Headshot for author Luigi Wewege

Luigi Wewege is the Senior Vice President, and Head of Private Banking at Caye International Bank. Outside of the bank, he serves as an Instructor at the FinTech School which provides online training courses on the latest technological and innovation developments within the financial services industry. Luigi is also the published author of: The Digital Banking Revolution.

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