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BofA (BAC) Q1 Earnings Beat on Strength in IB and Trading
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Bank of America’s (BAC - Free Report) first-quarter 2024 adjusted earnings of 83 cents per share outpaced the Zacks Consensus Estimate of 77 cents. The bottom line compared unfavorably with the 94 cents earned in the prior-year quarter.
After considering the FDIC special assessment charge of $700 million, earnings per share was 76 cents.
Despite modest loan growth (loan balances rose 0.3% from the prior-year period) and high interest rates, BofA recorded a decline in net interest income (NII) because of higher deposit costs.
Nevertheless, BofA witnessed a 1.9% increase in total deposit balances at the end of the quarter.
Also, total IB fees (in the Global Banking division) of $850 million increased 27.2% year over year, driven primarily by growth in underwriting income (up more than 50% year over year). Advisory services revenues witnessed a decent increase in the quarter.
Similar to the second, third and fourth quarters of 2023, BofA recorded an improvement in trading numbers in first-quarter 2024. Sales and trading revenues (excluding net DVA) were up 2.5% from the prior-year quarter to $5.18 billion. Fixed-income trading fees declined 3.6%, while equity trading income jumped 15.1%.
Overall, the company’s net income applicable to common shareholders plunged 19.8% from the prior-year quarter to $6.14 billion. Our estimate for the same was $6.15 billion and did not take into account non-recurring items reported in the quarter.
Revenues Decline, Expenses Rise
Net revenues were $25.82 billion, which beat the Zacks Consensus Estimate of $25.28 billion. However, the top line declined 1.7% from the prior-year quarter.
NII (fully taxable-equivalent basis) fell 2.7% year over year to $14.19 billion. Our estimate for NII was $14.09 billion.
Net interest yield contracted 21 basis points (bps) to 1.99%.
Non-interest income decreased marginally from the prior-year quarter to $11.79 billion. The decline was mainly due to a fall in fees from market-making and similar activities. We had projected non-interest income of $11.22 billion.
Non-interest expenses were $17.24 billion, up 6.2% year over year. Our estimate for non-interest expenses was $16.40 billion.
The efficiency ratio was 66.77%, up from 61.84% in the year-ago quarter. An increase in the efficiency ratio indicates a deterioration in profitability.
Credit Quality Worsens
Provision for credit losses was $1.32 billion, up 41.7% from the prior-year quarter.
Net charge-offs jumped 86% year over year to $1.50 billion. As of Mar 31, 2024, non-performing loans and leases as a percentage of total loans were 0.56%, up 18 bps year over year.
Capital Position Strong
Book value per share as of Mar 31, 2024, was $33.71 compared with $31.58 a year ago. Tangible book value per share as of the first-quarter end was $24.79, up from $22.78.
At the end of March 2023, the common equity tier 1 capital ratio (advanced approach) was 13.4%, up from 12.9% as of Mar 31, 2023.
Capital Distribution Update
In the reported quarter, the company returned $4.4 billion to shareholders in dividends and share repurchases.
Our Take
BofA’s focus on digitizing and expanding operations, decent loan growth, and high interest rates are likely to keep aiding growth. However, elevated expenses, rising funding costs and near-term macroeconomic factors pose major headwinds.
Bank of America Corporation Price, Consensus and EPS Surprise
Wells Fargo & Company’s (WFC - Free Report) first-quarter 2024 adjusted earnings per share of $1.26 surpassed the Zacks Consensus Estimate of $1.10. The adjusted figure excludes the impacts of expenses from the FDIC special assessment. In the prior-year quarter, the company reported earnings per share of $1.23.
WFC’s results benefited from higher non-interest income. An improvement in capital ratios and a decline in provisions were other positives. However, a decrease in NII and loan balances and an increase in expenses were the undermining factors for WFC.
Citigroup Inc.’s (C - Free Report) first-quarter 2024 net income from continuing operations per share of $1.58 surpassed the Zacks Consensus Estimate of $1.13. However, the metric declined 28% from the year-ago quarter.
However, C witnessed declines in total loans and deposits in the quarter. Also, a dip in revenues and deteriorating credit quality were worrisome.
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BofA (BAC) Q1 Earnings Beat on Strength in IB and Trading
Bank of America’s (BAC - Free Report) first-quarter 2024 adjusted earnings of 83 cents per share outpaced the Zacks Consensus Estimate of 77 cents. The bottom line compared unfavorably with the 94 cents earned in the prior-year quarter.
After considering the FDIC special assessment charge of $700 million, earnings per share was 76 cents.
Despite modest loan growth (loan balances rose 0.3% from the prior-year period) and high interest rates, BofA recorded a decline in net interest income (NII) because of higher deposit costs.
Nevertheless, BofA witnessed a 1.9% increase in total deposit balances at the end of the quarter.
Also, total IB fees (in the Global Banking division) of $850 million increased 27.2% year over year, driven primarily by growth in underwriting income (up more than 50% year over year). Advisory services revenues witnessed a decent increase in the quarter.
Similar to the second, third and fourth quarters of 2023, BofA recorded an improvement in trading numbers in first-quarter 2024. Sales and trading revenues (excluding net DVA) were up 2.5% from the prior-year quarter to $5.18 billion. Fixed-income trading fees declined 3.6%, while equity trading income jumped 15.1%.
Overall, the company’s net income applicable to common shareholders plunged 19.8% from the prior-year quarter to $6.14 billion. Our estimate for the same was $6.15 billion and did not take into account non-recurring items reported in the quarter.
Revenues Decline, Expenses Rise
Net revenues were $25.82 billion, which beat the Zacks Consensus Estimate of $25.28 billion. However, the top line declined 1.7% from the prior-year quarter.
NII (fully taxable-equivalent basis) fell 2.7% year over year to $14.19 billion. Our estimate for NII was $14.09 billion.
Net interest yield contracted 21 basis points (bps) to 1.99%.
Non-interest income decreased marginally from the prior-year quarter to $11.79 billion. The decline was mainly due to a fall in fees from market-making and similar activities. We had projected non-interest income of $11.22 billion.
Non-interest expenses were $17.24 billion, up 6.2% year over year. Our estimate for non-interest expenses was $16.40 billion.
The efficiency ratio was 66.77%, up from 61.84% in the year-ago quarter. An increase in the efficiency ratio indicates a deterioration in profitability.
Credit Quality Worsens
Provision for credit losses was $1.32 billion, up 41.7% from the prior-year quarter.
Net charge-offs jumped 86% year over year to $1.50 billion. As of Mar 31, 2024, non-performing loans and leases as a percentage of total loans were 0.56%, up 18 bps year over year.
Capital Position Strong
Book value per share as of Mar 31, 2024, was $33.71 compared with $31.58 a year ago. Tangible book value per share as of the first-quarter end was $24.79, up from $22.78.
At the end of March 2023, the common equity tier 1 capital ratio (advanced approach) was 13.4%, up from 12.9% as of Mar 31, 2023.
Capital Distribution Update
In the reported quarter, the company returned $4.4 billion to shareholders in dividends and share repurchases.
Our Take
BofA’s focus on digitizing and expanding operations, decent loan growth, and high interest rates are likely to keep aiding growth. However, elevated expenses, rising funding costs and near-term macroeconomic factors pose major headwinds.
Bank of America Corporation Price, Consensus and EPS Surprise
Bank of America Corporation price-consensus-eps-surprise-chart | Bank of America Corporation Quote
Currently, BAC carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Major Banks
Wells Fargo & Company’s (WFC - Free Report) first-quarter 2024 adjusted earnings per share of $1.26 surpassed the Zacks Consensus Estimate of $1.10. The adjusted figure excludes the impacts of expenses from the FDIC special assessment. In the prior-year quarter, the company reported earnings per share of $1.23.
WFC’s results benefited from higher non-interest income. An improvement in capital ratios and a decline in provisions were other positives. However, a decrease in NII and loan balances and an increase in expenses were the undermining factors for WFC.
Citigroup Inc.’s (C - Free Report) first-quarter 2024 net income from continuing operations per share of $1.58 surpassed the Zacks Consensus Estimate of $1.13. However, the metric declined 28% from the year-ago quarter.
However, C witnessed declines in total loans and deposits in the quarter. Also, a dip in revenues and deteriorating credit quality were worrisome.