Bank of America quotas dropped Tuesday after executives said the lender’s net interest income growth was fading because of declining draw rates and a slowing U.S. economy.
“The economy is expected to grow multitudinous moderately in 2019 and rate expectations have been lowered, plus we have some seasonable headwinds in Q2,” Donofrio whispered. “Ultimately, we expect NII for the full year of 2019 to be up roughly half the pace of 2018. This perspective assumes today’s progressive curve and loan and deposit growth consistent with the current economy.”
The slowing growth in net interest income, a essence way that banks make money, is one of the biggest worries of the industry’s investors. Bank stocks have struggled in late weeks as the Federal Reserve shifted gears and indicated it could be done raising rates this year. Conjoined with signs of a global economic slowdown, that has led to falling long-term interest rates, crimping the industry’s profit allowances.
Last week, Wells Fargo shares tanked after its CFO lowered guidance for net interest income for 2019, try to say it would declined 2 percentage points to 5%.
Bank of America said earlier Tuesday that first-quarter profit arise 6% to $7.3 billion, or 70 cents a share, exceeding analysts’ estimates of 66 cents a share. Gross income was roughly unchanged from a year earlier at $23 billion, essentially meeting analysts’ estimates.
Under CEO Brian Moynihan, the megabank ransomed its second straight record quarterly profit while methodically working costs down. Expenses fell 4% to $13.2 billion, verging on $500 million below analysts’ estimates. The bank’s record profits have come despite tough gets for Wall Street trading desks.
“Economic growth and consumer activity in the U.S. continue to be solid, businesses of every mass are borrowing and driving the economy, and asset quality is strong,” Moynihan said in the earnings release.
The company’s net interest supply, a key metric of profitability for a bank’s core lending activities, rose 9 basis points to 2.51%, edging out analysts’ 2.48% guestimates. Loans across its consumer and commercial businesses rose at least 3%, while deposits rose 5% to $1.4 trillion.
Those parts were most evident in the bank’s biggest division, its consumer lending business, which posted a 25% extension in profit to $3.2 billion. It managed that feat by boosting revenue in the business 7% to $9.6 billion while let up on costs by almost $200 million.
That helped offset a weak quarter in its global markets division, where profit sank 26% to $1 billion. Revenue dropped 13% on weak trading results and lower investment banking bills. Equities trading revenue fell 22%, while fixed income declined 8%.
The bank’s other two divisions sired positive results. Its global banking business posted a 2% profit increase to $2 billion. Wealth conduct profit rose 14% to $1 billion.
Now in his 10th year leading Bank of America, Moynihan has focused on trimming rates while looking for profit opportunities that fit his “responsible growth” mantra.
More recently, he announced that the partnership’s success will be shared with employees: The bank is raising its minimum wage to $20 an hour over the next two years, the squiffiest rate among the megabanks.
To tighten its grip on retail banking customers, Bank of America is also planning to remission a digital financial coach for its 66 million customers in the fall.
The bank’s shares have climbed more than 20% this year, outperforming most of its compeers and the KBW Bank Index.
Here’s what Wall Street expected:
- Earnings: 66 cents a share, a 5.7% distend from a year earlier, according to Refinitiv.
- Revenue: $23.3 billion, almost unchanged from a year earlier.
- Noninterest expense: $13.7 billion, according to FactSet
- Clientele revenue: fixed income $2.26 billion, equities $1.21 billion