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BofA profit beats estimates on higher interest rates, loan growth

(Reuters) – Bank of America (BAC.N) reported a 34 percent rise in first-quarter profit on Monday, topping Wall Street estimates, as the bank benefited from higher interest rates and growth in loans and deposits.

FILE PHOTO: A Bank of America sign is displayed outside a branch in Tucson, Arizona January 21, 2011. REUTERS/Joshua Lott/File Photo

Revenue rose at three of BofA’s four major businesses. In consumer banking, its biggest business, revenue increased by 9 percent.

Higher interest rates helped BofA charge more for loans while keeping deposit rates low. The lender relies heavily on higher interest rates to maximize profits as it has a large stock of deposits and rate-sensitive mortgage securities.

A 1 percent fall in expenses also helped results, as Chief Executive Officer Brian Moynihan’s years-long effort to cut costs pays off.

Shares of the second-largest U.S. bank by assets rose 1 percent in premarket trading. They have gained 33 percent in the past 12 months, but fell about 3 percent along with other U.S. banks on Friday.

“Strong client activity, coupled with a growing global economy and solid U.S. consumer activity, led to record quarterly earnings,” Chief Executive Brian Moynihan said in a statement.

Net income attributable to shareholders rose to $6.49 billion in the three months ended March 31 from $4.84 billion a year earlier. Earnings per share rose to 62 cents, beating the average analyst estimate of 59 cents, according to Thomson Reuters I/B/E/S.

Total revenue, net of interest expense, rose about 4 percent to $23.28 billion.

The only business to record a fall in revenue was global banking, where revenue fell 0.5 percent, hurt by lower investment banking fees.

The lender’s non-interest expenses declined to $13.90 billion from $14.09 billion a year earlier.

Its efficiency ratio, a closely watched measure of revenue divided by expenses, was 60 percent in the first quarter, down from 63 percent a year earlier. A low ratio indicates a bank is more efficient.

BofA’s trading revenue was up only 1 percent. Equities trading revenue, excluding items, rose 38 percent, while revenue from trading fixed income fell 13 percent.

BofA’s trading results mirrored those of rivals JPMorgan Chase & Co (JPM.N) and Citigroup Inc (C.N). Revenue from stock trading rose at both the banks, but weakness in bond trading crimped total trading revenue growth.

Reporting by Sweta Singh in Bengaluru and Elizabeth Dilts in New York; Editing by Saumyadeb Chakrabarty

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