Bank of America beats Q1 profit estimates on strength in consumer lending

Bank of America Corp reported a smaller-than-expected 13% fall in first-quarter profit on Monday, as strong growth in its consumer lending business helped cushion the blow from a slowdown in global deal-making.

The bank reported a 9% rise in consumer banking revenue to $8.8 billion in the quarter ended March.

"First-quarter results were strong despite challenging markets and volatility," Chief Financial Officer Alastair Borthwick said in a statement.

"Net interest income increased by $1.4 billion versus the year-ago quarter supported by strong loan and deposit growth.

Going forward, and with the forward curve expectation of rising interest rates, we anticipate realizing more of the benefit of our deposit franchise."

However, total investment banking fees plunged 35% to $1.5 billion in the quarter.

Big U.S. banks benefited from a deal-making boom last year after the Federal Reserve pumped liquidity into capital markets to mitigate the economic impact of the COVID-19 pandemic.

This year, however, investment banking businesses have taken a hit as geopolitical turmoil fueled by Russia's invasion of Ukraine slammed the brakes on last year's breakneck pace of deal-making and a boom in the IPO market.

Bank of America's global banking segment, which houses the investment banking business, reported $165 million of provisions for credit losses, primarily because it built reserves tied to its exposure to Russia and a growth in loans.

The second-largest U.S. bank by assets released $362 million from its reserves it had set aside for bad loans.

Net interest income, a key measure of how much the bank can make from lending, rose 13% to $11.6 billion in the quarter.

Because of the composition of its balance sheet, Bank of America is most sensitive among large U.S. banks to changes in interest rates and is expected to benefit from the U.S. Federal Reserve's aggressive plan to raise interest rates.

Profit applicable to common shareholders fell nearly 13% to $6.6 billion, or 80 cents per share, for the quarter ended March 31 from $7.56 billion, or 86 cents per share, a year earlier.

The earnings number for the latest quarter had tough comparisons, as the year-ago period included profits from record deal-making activity and large reserve release.

The bank reported an 8% rise in pre-tax, pre-provision earnings, which strip out reserves.

Analysts on average had expected a profit of 75 cents per share, according to the IBES estimate from Refinitiv.

Shares of the bank were up 1% in premarket trading.

Bank of America rounds out a mixed earnings season for Wall Street banks with peers JP Morgan Chase, Goldman Sachs , Wells Fargo, Morgan Stanley and Citigroup posting profit declines.