Bank of America Corp. (ticker: BAC) is making the most of an improving environment for big U.S. banks. On Tuesday morning, the company reported first-quarter earnings and revenue that topped consensus Wall Street expectations.
Bank of America reported revenue of $22.2 billion compared to consensus analyst expectations for $21.6 billion. The company’s earnings per share of 41 cents also beat consensus estimates, which called for EPS of 35 cents. Net income of $4.9 billion was up 40 percent from a year ago, and revenue was up 7 percent compared to Q1 2016.
“The U.S. economy continues to show consumer and business optimism, and our results reflect that,” CEO Brian Moynihan says.
Large U.S. banks have experienced a number of positive headlines in recent months starting with President Donald Trump’s election in November. Throughout the 2016 campaign, Trump repeatedly pledged to cut corporate taxes and eliminate federal regulations, such as the Dodd-Frank Act.
In addition, the Federal Reserve has delivered two interest rate hikes since December. Higher interest rates allow banks more flexibility with net interest margin – the spread between the rate the bank charges on loans and the rate it pays to depositors. In Q1, Bank of America reported a net interest margin of 2.39 percent, up from 2.23 percent last quarter.
Bank of America’s investment banking revenue was up 37 percent in Q1, while consumer banking income climbed 7 percent.
“We grew loans and deposits, while remaining within our risk framework,” CFO Paul Donofrio says.
Bank of America continued the trend of strong bank earnings so far this quarter. Last week, JPMorgan Chase & Co. (JPM), Citigroup (C), and Wells Fargo & Co. (WFC) all reported their own Q1 earnings beats.
Back in January, Wells Fargo named Bank of America its top bank stock pick for 2017.
“We see up to 26 percent EPS upside potential for the banks in 2018,” analyst Matthew Burnell says.
Bank of America investors are hoping the bank’s strong showing in Q1 will break the stock’s negative momentum. After rising 48.5 percent in the first four months after the election, Bank of America shares were down 7.2 percent in the month prior to Tuesday’s earnings report.
Despite the sector’s strong performance in Q1, bank investors are growing…
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