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Higher Rates, Loans to Support BofA's (BAC) Q1 Earnings
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Bank of America (BAC - Free Report) is the most interest rate-sensitive bank among its peers. So, the current higher interest rate regime is likely to have boosted the company’s net interest income (NII). This, in turn, is expected to have supported its first-quarter 2023 earnings, slated to be announced on Apr 18 before the opening bell.
During the first quarter, the Federal Reserve continued its hawkish monetary policy stance, raising the interest rates by another 50 basis points. Thus, the policy rate reached 4.75-5%, the highest since 2008. This is likely to have had a favorable impact on BofA’s net interest margin (NIM) and NII. Yet, the inversion of the yield curve, the bank runs and recessionary fears in the to-be-reported quarter are expected to have weighed on it to some extent.
Further, lending activities continued at a decent pace in the first quarter. Per the Fed’s latest data, demand for real estate loans and consumer loans improved in January and February, while commercial and industrial loan demand was soft. However, following the bank runs in the first week of March, loan demand is likely to have decelerated as recessionary fears gained ground.
The Zacks Consensus Estimate for BAC’s average interest earnings assets is pegged at $2.62 trillion, suggesting a 5.6% decline from the year-ago reported number. Our estimate for the metric is $2.59 trillion, indicating a 7% fall.
Management expects NII for the first quarter to be approximately $14.4 billion. The Zacks Consensus Estimate for NII (FTE basis) of $14.45 billion suggests a 23.7% jump. Our estimate for NII (FTE) implies a rise of 23.6% to $14.44 billion.
Q1 Earnings & Revenue Growth Expectations
The Zacks Consensus Estimate for first-quarter earnings is pegged at 80 cents, which has moved 2.4% lower over the past 30 days. Our estimate for earnings is 75 cents.
The consensus estimate for sales of $25.07 billion indicates 8% growth. Our estimate for sales is $24.62 billion, reflecting a rise of 6%.
Click here to know about the other factors that are likely to have influenced BAC’s overall performance.
Bank of America Corporation Price and EPS Surprise
Decent loan demand and higher interest rates, along with robust trading business, might have supported this Zacks Rank #4 (Sell) stock’s first-quarter performance. Yet, muted investment banking business and higher reserve build to counter expected economic downturn are major headwinds.
Similar to BAC, other major banks like JPMorgan (JPM - Free Report) and Citigroup (C - Free Report) are expected to have witnessed a solid NII performance in the first quarter.
JPMorgan is likely to have benefited from higher rates and decent loan demand. The Zacks Consensus Estimate for JPM’s NII (FTE) of $19.45 billion suggests a 39.2% surge. Our estimate for NII implies a jump of 45.7% to $20.35 billion.
Similarly, Citigroup will benefit from the above-mentioned factors, while inversion of the yield curve and the bank runs are likely to have limited NII growth to some extent. The consensus estimate for C’s NII of $12.57 billion suggests a 15.6% year-over-year rise. We project a NII of $10.9 billion for the quarter.
Both JPM and C will come out with quarterly numbers on Apr 14.
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Higher Rates, Loans to Support BofA's (BAC) Q1 Earnings
Bank of America (BAC - Free Report) is the most interest rate-sensitive bank among its peers. So, the current higher interest rate regime is likely to have boosted the company’s net interest income (NII). This, in turn, is expected to have supported its first-quarter 2023 earnings, slated to be announced on Apr 18 before the opening bell.
During the first quarter, the Federal Reserve continued its hawkish monetary policy stance, raising the interest rates by another 50 basis points. Thus, the policy rate reached 4.75-5%, the highest since 2008. This is likely to have had a favorable impact on BofA’s net interest margin (NIM) and NII. Yet, the inversion of the yield curve, the bank runs and recessionary fears in the to-be-reported quarter are expected to have weighed on it to some extent.
Further, lending activities continued at a decent pace in the first quarter. Per the Fed’s latest data, demand for real estate loans and consumer loans improved in January and February, while commercial and industrial loan demand was soft. However, following the bank runs in the first week of March, loan demand is likely to have decelerated as recessionary fears gained ground.
The Zacks Consensus Estimate for BAC’s average interest earnings assets is pegged at $2.62 trillion, suggesting a 5.6% decline from the year-ago reported number. Our estimate for the metric is $2.59 trillion, indicating a 7% fall.
Management expects NII for the first quarter to be approximately $14.4 billion. The Zacks Consensus Estimate for NII (FTE basis) of $14.45 billion suggests a 23.7% jump. Our estimate for NII (FTE) implies a rise of 23.6% to $14.44 billion.
Q1 Earnings & Revenue Growth Expectations
The Zacks Consensus Estimate for first-quarter earnings is pegged at 80 cents, which has moved 2.4% lower over the past 30 days. Our estimate for earnings is 75 cents.
The consensus estimate for sales of $25.07 billion indicates 8% growth. Our estimate for sales is $24.62 billion, reflecting a rise of 6%.
Click here to know about the other factors that are likely to have influenced BAC’s overall performance.
Bank of America Corporation Price and EPS Surprise
Bank of America Corporation price-eps-surprise | Bank of America Corporation Quote
Our Viewpoint
Decent loan demand and higher interest rates, along with robust trading business, might have supported this Zacks Rank #4 (Sell) stock’s first-quarter performance. Yet, muted investment banking business and higher reserve build to counter expected economic downturn are major headwinds.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Competitive Landscape
Similar to BAC, other major banks like JPMorgan (JPM - Free Report) and Citigroup (C - Free Report) are expected to have witnessed a solid NII performance in the first quarter.
JPMorgan is likely to have benefited from higher rates and decent loan demand. The Zacks Consensus Estimate for JPM’s NII (FTE) of $19.45 billion suggests a 39.2% surge. Our estimate for NII implies a jump of 45.7% to $20.35 billion.
Similarly, Citigroup will benefit from the above-mentioned factors, while inversion of the yield curve and the bank runs are likely to have limited NII growth to some extent. The consensus estimate for C’s NII of $12.57 billion suggests a 15.6% year-over-year rise. We project a NII of $10.9 billion for the quarter.
Both JPM and C will come out with quarterly numbers on Apr 14.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.