Bank of America tops its estimates. Revenue driven by high rates.

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Higher interest rates have gone up

American bank

In the last quarter of the year, the bank recorded a modest increase in profits.

Bank of America (Stock ticker: BAC) reported revenue of $24.5 billion in the first quarter, beating estimates of $24.2 billion and coming in 11% higher than the year-ago quarter. profits, meanwhile, Mostly held stationary It comes in at $7.1 billion, or 85 cents a share — just ahead of the $7 billion the bank made last year. Analysts polled by FactSet expected Bank of America to report earnings of 77 cents per share.

Among the big banks, Bank of America was one of the biggest beneficiaries of the Fed’s interest rate increases in 2022. Net interest income rose 29% to $14.7 billion for the quarter as the lender collected higher interest payments on loans it issued.

Higher interest rates come with pros and cons. As banks earn more interest on their loans, higher rates ultimately mean that banks will have to pay depositors higher interest.

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Bank of America has also made a modest build of it bad loan reserves To the tune of $403 million, compared to $851 million in reserves in the same quarter last year. However, analysts at Deutsche Bank say they expect BAC’s reserves to be lower than their peers during a potential downturn. Last month , Barron He wrote positively about Bank of America, noting that it has the highest-quality loan book in its peer group. In a Friday release, Bank of America said net debits rose to $689 million from $362 million in the year-ago quarter, but levels are still well below pre-pandemic numbers, which means customers are still healthy.

Bank of America CEO Brian Moynihan touted the bank’s results in the face of a challenging environment for lenders.

“We finished the year on a strong note, with earnings growing year-over-year in the fourth quarter in an increasingly slowing economic environment,” Moynihan said. “Themes in the quarter were consistent throughout the year as both organic and rate growth helped deliver the value of our deposit franchise.”

Bank of America shares are down nearly 30% over the past 12 months, compared to the SPDR S&P Bank ETF (KBE), which was down 21% as of Wednesday’s close.

c. B. Morgan Chase

(JPM),

Citigroup

(Atmosphere

Wells Fargo

(WFC) too Friday’s report results. Morgan Stanley (MS) and

Goldman Sachs

(GS) shares its results on Tuesday.

Write to Carleton English at [email protected]