Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Bank of America revenue misses forecasts, shares fall

Published 04/16/2019, 11:42 AM
Updated 04/16/2019, 11:42 AM
© Reuters. A Bank of America logo is pictured in the Manhattan borough of New York City

© Reuters. A Bank of America logo is pictured in the Manhattan borough of New York City

By Matt Scuffham and Siddharth Cavale

(Reuters) - Bank of America Corp (NYSE:BAC) on Tuesday reported first-quarter revenue that fell short of expectations and predicted that net interest income would rise half as fast this year, sending its shares down.

Bank of America, the second-biggest U.S. bank by assets, followed rival domestic lenders by struggling to generate top-line growth in the latest quarter and suffering from a decline in trading revenue.

The bank's shares were down 2.7 percent in morning trade.

Lower market volatility hurt trading revenue at U.S. banks during the first quarter. That left them relying on expense cuts to drive profitability.

JPMorgan Chase & Co (NYSE:JPM), the country's biggest bank by assets, has been the exception. It increased revenue and beat expectations while seeing expenses rise as it invests in new technology.

Allowing for different tax treatments on some assets, Bank of America said revenue came in at $23.2 billion. That compared with the average analyst estimate of $23.3 billion, according to IBES data from Refinitiv.

Chief Financial Officer Paul Donofrio told analysts on a conference call that the bank anticipates its net interest income will rise by 3 percent in 2019, compared with 6 percent last year.

"We've got some near-term headwinds," he said.

The Federal Reserve has signaled it is unlikely to raise interest rates in 2019 given risks to the U.S. economy from a global slowdown. Investors fear that could pressure net interest income, or the difference between what a bank earns on loans and pays on deposits.

The bank saw 3 percent growth in consumer loans and 4 percent growth in loans to businesses in the first quarter, allowing it to capture more revenue from higher U.S. interest rates. The company reported a 5 percent increase in deposits from a year earlier.

Revenue rose in two of the lender's four main businesses.

Donofrio said growth in the bank's deposits and loans suggested the performance of the U.S. economy remained solid despite recession concerns.

"Bank of America has demonstrated for years now that we can grow well in an economy that is just growing moderately," he told reporters on a conference call.

Chief Executive Brian Moynihan cited demand for credit from middle-market business. He said that was "good news for the economy overall."

The lender has benefited from the central bank's four rate hikes in 2018. It relies heavily on higher interest rates to maximize profits as it has a large deposit pool and retains rate-sensitive mortgage securities.

Net interest income - the difference between what a lender earns on loans and pays on deposits - rose 5 percent to $12.38 billion. Deposits on average also rose nearly 5 percent to $1.36 trillion.

However, the bank's trading desks, like those of its peers, have had a slow start this year because of the U.S. government shutdown and lower volatility. Changes in the U.S. tax code and concerns about a trade war spurred more trading a year ago.

Overall trading revenue declined 17 percent. Equities trading revenue fell 22 percent and fixed-income trading revenue slipped 8 percent.

Advisory fees at Bank of America stayed flat, indicating the bank is missing out on the M&A boom lifting rival investment banks. On Monday, Goldman Sachs Group Inc (NYSE:GS) reported a 51 percent surge in advisory fees.

Net income applicable to common shareholders rose 6 percent to $6.87 billion.

© Reuters. A Bank of America logo is pictured in the Manhattan borough of New York City

Excluding one-time items, the bank earned 71 cents per share, beating the 66 cents per share analysts on average had expected, according to IBES data from Refinitiv.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.