With Bank of America’s first-quarter profit loss less than expected, executives are maintaining a bullish outlook heading into spring.
"Could a slowdown in the economy happen? Perhaps. But right now, the size of the economy is bigger than pre-pandemic levels. Consumer spending remains strong, unemployment is low and wages are rising," Chief Executive Officer Brian Moynihan told analysts on a conference call.
Though first-quarter profits fell 13%, Bank of America customers spent at record-setting levels, in a double-digit percentage increase from last year, Moynihan said. The bank reported a 9% rise in consumer banking revenue to $8.8 billion.
Also, the bank’s net interest income, the difference between what it earns from lending and pays out on deposits, is expected to increase $650 million in the second quarter, as the Federal Reserve's rate hikes should help banks’ core consumer business. Bank of America has a high proportion of consumer deposits and may benefit more from rate increases than rivals, analysts say. Additionally, the release of $362 million from reserves set aside for bad loans boosted profits.
Investment banking did not fare as well, with fees dropping 35% to $1.5 billion in the first quarter. Following Russia’s invasion of Ukraine, dealmaking subsided amidst the resulting geopolitical turmoil, an about-face from last year’s COVID-19-spurred boom. The Fed flooded capital markets with liquidity to offset the pandemic’s impact.
Bank of America's global banking segment, which includes the investment banking business, reported $165 million of provisions for credit losses. It had built up reserves linked to its Russian exposure – about $700 million – and a growth in loans. Executives said BoA has been reducing its exposure in Russia since 2015, in response to the country’s invasion of Crimea.