BofA profit surges 40% as fixed-income trading beats estimates

BANK OF AMERICA's first-quarter profit rose 40 percent on a year-over-year basis, beating estimates, thanks to improved trading revenue.
BANK OF AMERICA's first-quarter profit rose 40 percent on a year-over-year basis, beating estimates, thanks to improved trading revenue.

NEW YORK – Bank of America Corp. posted a 40 percent year-over-year surge in first-quarter profit, fueled by stronger trading revenue, and added employees for the first time in more than five years as CEO Brian T. Moynihan expressed optimism about the U.S. economy.

Fixed-income trading revenue rose 29 percent to $2.93 billion, the second-biggest U.S. bank said Tuesday in a statement, beating analysts’ $2.6 billion average estimate and pushing the firm’s stock higher. Equity trading revenue also was better than expected, climbing 7.4 percent to $1.1 billion.

Total profit jumped to $4.86 billion, or 41 cents a share, from $3.47 billion, or 28 cents, a year earlier, according to the statement. That beat the 35 cent average estimate of 27 analysts surveyed by Bloomberg. Revenue increased 7 percent to $22.2 billion, also more than estimated. Expenses rose less than 1 percent to $14.8 billion.

Net interest income climbed 5.5 percent to $11.1 billion from a year earlier, in line with analysts’ estimates. Net interest margin – the difference between what a bank charges for loans and pays depositors – rose 16 basis points to 2.39 percentage points from the previous quarter, the biggest jump among large U.S. banks reporting results so far.

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Bank of America shares climbed 1 percent to $23.03 in early trading at 8:03 a.m. in New York.

“The U.S. economy continues to show consumer and business optimism, and our results reflect that,” Moynihan said in the statement. Bank of America added 549 employees in the quarter, the first increase since the third quarter of 2011.

Last week, JPMorgan Chase & Co. and Citigroup Inc. also reported robust first-quarter revenue from bond trading. JPMorgan, the largest U.S. bank by assets, posted a 17 percent gain in fixed-income trading revenue, while Citigroup generated the most revenue from that business in three years. That contrasts with Goldman Sachs Group Inc., which on Tuesday posted worse-than-expected fixed-income results.

Bank stocks have climbed since November’s U.S. election in part on expectations that Federal Reserve rate increases would boost profits. Charlotte, N.C.-based Bank of America, which is among the most sensitive to interest-rate changes, has led the surge among the country’s biggest lenders, gaining 38 percent through Monday.

Profit from the global markets division, which houses the bank’s trading units, climbed 33 percent to $1.3 billion. Investment-banking revenue rose 37 percent to $1.58 billion, compared with analysts’ $1.41 billion estimate.

Mortgage banking fees plunged 72 percent to $122 million, the biggest decline among large U.S. banks. Fees at JPMorgan sank 39 percent, while Wells Fargo & Co., the largest U.S. mortgage lender, reported a 23 percent drop.

Profit in the consumer-banking division climbed 7.4 percent to $1.89 billion, as revenue increased 5.4 percent to $8.28 billion. The firm closed 20 branches during the quarter, bringing the total to 4,559.

Laura J. Keller is a Bloomberg News staff writer.

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