McCreath: 40% of S&P earnings per share growth due to U.S. banks
Bank of America Corp.’s traders and investment bankers reaped another windfall, joining their Wall Street rivals in capitalizing on the stock market’s wild ride this year.
Revenue from sales and trading rose 17 per cent, a bigger jump than expected, while equity underwriting fees more than tripled. The results echo blockbuster profits at JPMorgan Chase & Co. and Goldman Sachs Group Inc., which benefited from increased trading amid stock-market volatility and a flurry of activity by blank-check companies.
As the health crisis drags on, U.S. banking giants have remained resilient. Their Wall Street operations picked up the slack for other divisions, bringing in deal fees and activity from clients who were reacting to financial-market gyrations. Main Street units fared worse, as millions of Americans lost their jobs and businesses were shuttered. But there are some indications that consumers are starting to spend again as the vaccine rollout and stimulus efforts help the economic recovery pick up steam.
Bank of America’s fixed-income traders delivered a 22 per cent climb in revenue, while its stock desks saw a 10 per cent increase. The overall jump didn’t reach the blowout numbers that JPMorgan and Goldman Sachs announced yesterday, but the bank’s total haul of US$5.1 billion beat analysts’ US$4.37 billion forecast.
Investment banking fees surged more than 60 per cent to US$2.25 billion, led by a surge in equity-underwriting fees to US$900 million.
Shares of the bank rose about 1 per cent at 5:37 a.m. in early New York trading.
Noninterest expenses rose 15 per cent to US$15.5 billion, driven by costs linked to COVID-19, special compensation awards for associates and charges for shrinking its real estate footprint.
“We saw strong growth in our capital markets and wealth management businesses, which allowed us to absorb additional expenses,” Chief Financial Officer Paul Donofrio said in the statement.
The bank’s net interest income, or revenue from customer loan payments minus what the company pays depositors, decreased 16 per cent to US$10.2 billion. Loans in the consumer banking unit dropped 8 per cent.
The bank joined rivals in releasing reserves as the worst-case pandemic scenarios didn’t play out. It released US$2.7 billion from its stockpile last quarter after stashing away more than US$11 billion last year to cover loans likely to sour.
Also in the first-quarter results:
- Net income rose to US$8.1 billion from US$5.47 billion a year earlier. It exceeded the US$6.25 billion estimate of 13 analysts. Per-share earnings of 86 cents beat analysts’ 66-cent forecast.
- Total revenue increased slightly to US$22.8 billion.