Bank Of America Q1 Profits Drop 18% On Increased Costs

Bank of America reported an 18 per cent decline in first-quarter profits due to increased expenses stemming from higher interest rates, despite surpassing analysts' expectations.

Based in Charlotte, North Carolina, the bank recorded a profit of USD 6.67 billion or 76 cents per share, down from USD 8.2 billion or 94 cents per share, in the corresponding period last year. The decline was partly attributed to a one-time USD 700 million payment to the Federal Deposit Insurance Corp. to aid in replenishing the deposit insurance fund.

Excluding this charge, the bank's earnings stood at 83 cents per share.

Bank of America has grappled with the impact of rising interest rates on its loan and investment holdings over the past year. The bank acquired a significant number of bonds during the pandemic when rates were low, resulting in depreciation as interest rates climbed. Additionally, increased deposit costs have marginally squeezed profits. The bank's net interest yield declined from 2.20 per cent in 2023 to 1.99 per cent in 2024.

In the consumer banking division, its largest by revenue and profits, revenue decreased by 5 per cent to USD 10.2 billion. Despite observing increased account openings and card spending by consumers, the bank had to allocate more reserves to cover potential loan losses and write off credit card balances.

However, investment banking emerged as a bright spot for the bank, with global investment banking fees surging 35 per cent in the quarter. While bond trading revenues decreased, stock trading revenues saw an uptick, maintaining overall trading revenue at a stable level.