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BofA (BAC) Q1 Earnings Beat on Trading Surge, Rate Hike
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Higher trading revenues as well as rise in interest rates drove Bank of America Corporation’s (BAC - Free Report) first-quarter 2017 earnings of 41 cents per share, which handily outpaced the Zacks Consensus Estimate of 35 cents. Further, the figure was 46% higher than the prior-year quarter.
Also, markets seem to be happy with the BofA’s quarterly results. In the pre-market trading, the company’s shares were up nearly 1.3% as of the time of writing this article. Notably, the price reaction during the full trading session will provide a better idea about how the investors accepted the results.
Impressive growth in fixed income trading revenues, higher equity trading and significant rise in investment banking fees supported fee income. Further, modest loan growth and higher interest rates aided the rise in net interest income. However, mortgage banking income declined due to lower total mortgage production.
Additionally, provision for credit losses recorded a fall, driven by continued improvement in the energy sector. Further, efficient expense management was sufficient to aid the bottom line.
Also, the overall performance of the company’s business segments, in terms of net income generation, was decent. All segments witnessed improvement in net income.
Revenue Growth, Stable Expenses Supported Results
Net revenue amounted to $22.4 billion, up 7% from the prior-year quarter. Also, the top line beat the Zacks Consensus Estimate of $21.5 billion.
Net interest income, on a fully taxable-equivalent basis, grew 5% year over year to $11.3 billion. Further, net interest yield rose 6 basis points (bps) year over year to 2.39%.
Also, non-interest income rose 9% year over year to $11.2 billion. The increase reflected higher sales and trading results, and solid growth in investment banking fees.
Non-interest expenses were $14.8 billion, relatively stable year over year, reflecting the company’s streamlining and simplifying efforts.
Improvement in Credit Quality
As of Mar 31, 2017, ratio of nonperforming loans, leases and foreclosed properties was 0.84%, down 20 bps year over year. Further, net charge-offs plunged 13% from the year-ago quarter to $934 million, indicating lower losses in consumer real estate and lesser energy-related losses.
Also, provision for credit losses fell 16% year over year to $835 million, reflecting improved credit quality in commercial portfolio, mainly energy.
Strong Capital Position
The company’s book value per share as of Mar 31, 2017 was $24.36 compared with $23.14 as of Mar 31, 2016. Tangible book value per share as of Mar 31, 2017 was $17.23, up from $16.19 as of Mar 31, 2016.
As of Mar 31, 2017, the company’s common equity tier 1 capital ratio (Basel 3 Transition) was 11.0%.
Our Take
Impressive performance in fixed income and equity trading continued. Further, as expected, rise in investment banking fees indicate growing confidence on economic stability.
Also, BofA’s efforts to realign its balance sheet, focus on core operations and prudent cost management will likely support bottom-line growth. Further, the bank is well positioned to benefit from higher interest rates.
Bank of America Corporation Price, Consensus and EPS Surprise
Impressive investment banking and trading revenues drove JPMorgan Chase & Co.’s (JPM - Free Report) first-quarter 2017 earnings, which handily outpaced the Zacks Consensus Estimate. Also, results were supported by a fall in provision for credit losses, strong loan growth and higher interest rates. However, a rise in operating expenses and lower mortgage banking income were the headwinds.
Driven by net interest income, Wells Fargo & Company’s (WFC - Free Report) first-quarter 2017 earnings outpaced the Zacks Consensus Estimate. The company witnessed organic growth aided by strong loans and deposit balances. Higher net interest income was also a positive. However, higher expenses and lower non-interest income were concerns.
Citigroup Inc. (C - Free Report) delivered a positive earnings surprise of 8.9% in first-quarter 2017, riding on higher revenues. The quarter witnessed a rise in overall revenues, driven by higher market revenues, supported by an improved trading environment. Moreover, results reflected prudent expense management.
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BofA (BAC) Q1 Earnings Beat on Trading Surge, Rate Hike
Higher trading revenues as well as rise in interest rates drove Bank of America Corporation’s (BAC - Free Report) first-quarter 2017 earnings of 41 cents per share, which handily outpaced the Zacks Consensus Estimate of 35 cents. Further, the figure was 46% higher than the prior-year quarter.
Also, markets seem to be happy with the BofA’s quarterly results. In the pre-market trading, the company’s shares were up nearly 1.3% as of the time of writing this article. Notably, the price reaction during the full trading session will provide a better idea about how the investors accepted the results.
Impressive growth in fixed income trading revenues, higher equity trading and significant rise in investment banking fees supported fee income. Further, modest loan growth and higher interest rates aided the rise in net interest income. However, mortgage banking income declined due to lower total mortgage production.
Additionally, provision for credit losses recorded a fall, driven by continued improvement in the energy sector. Further, efficient expense management was sufficient to aid the bottom line.
Also, the overall performance of the company’s business segments, in terms of net income generation, was decent. All segments witnessed improvement in net income.
Revenue Growth, Stable Expenses Supported Results
Net revenue amounted to $22.4 billion, up 7% from the prior-year quarter. Also, the top line beat the Zacks Consensus Estimate of $21.5 billion.
Net interest income, on a fully taxable-equivalent basis, grew 5% year over year to $11.3 billion. Further, net interest yield rose 6 basis points (bps) year over year to 2.39%.
Also, non-interest income rose 9% year over year to $11.2 billion. The increase reflected higher sales and trading results, and solid growth in investment banking fees.
Non-interest expenses were $14.8 billion, relatively stable year over year, reflecting the company’s streamlining and simplifying efforts.
Improvement in Credit Quality
As of Mar 31, 2017, ratio of nonperforming loans, leases and foreclosed properties was 0.84%, down 20 bps year over year. Further, net charge-offs plunged 13% from the year-ago quarter to $934 million, indicating lower losses in consumer real estate and lesser energy-related losses.
Also, provision for credit losses fell 16% year over year to $835 million, reflecting improved credit quality in commercial portfolio, mainly energy.
Strong Capital Position
The company’s book value per share as of Mar 31, 2017 was $24.36 compared with $23.14 as of Mar 31, 2016. Tangible book value per share as of Mar 31, 2017 was $17.23, up from $16.19 as of Mar 31, 2016.
As of Mar 31, 2017, the company’s common equity tier 1 capital ratio (Basel 3 Transition) was 11.0%.
Our Take
Impressive performance in fixed income and equity trading continued. Further, as expected, rise in investment banking fees indicate growing confidence on economic stability.
Also, BofA’s efforts to realign its balance sheet, focus on core operations and prudent cost management will likely support bottom-line growth. Further, the bank is well positioned to benefit from higher interest rates.
Bank of America Corporation Price, Consensus and EPS Surprise
Bank of America Corporation Price, Consensus and EPS Surprise | Bank of America Corporation Quote
Currently, BofA holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Major Banks
Impressive investment banking and trading revenues drove JPMorgan Chase & Co.’s (JPM - Free Report) first-quarter 2017 earnings, which handily outpaced the Zacks Consensus Estimate. Also, results were supported by a fall in provision for credit losses, strong loan growth and higher interest rates. However, a rise in operating expenses and lower mortgage banking income were the headwinds.
Driven by net interest income, Wells Fargo & Company’s (WFC - Free Report) first-quarter 2017 earnings outpaced the Zacks Consensus Estimate. The company witnessed organic growth aided by strong loans and deposit balances. Higher net interest income was also a positive. However, higher expenses and lower non-interest income were concerns.
Citigroup Inc. (C - Free Report) delivered a positive earnings surprise of 8.9% in first-quarter 2017, riding on higher revenues. The quarter witnessed a rise in overall revenues, driven by higher market revenues, supported by an improved trading environment. Moreover, results reflected prudent expense management.
5 Trades Could Profit "Big-League" from Trump Policies
If the stocks above spark your interest, wait until you look into companies primed to make substantial gains from Washington's changing course.
Today Zacks reveals 5 tickers that could benefit from new trends like streamlined drug approvals, tariffs, lower taxes, higher interest rates, and spending surges in defense and infrastructure. See these buy recommendations now >>