Banking, finance, and taxes

Where Bank of America's Record Income Was Derailed

Paul Ausick

Published: April 16, 2019 9:45 am

Last Updated: January 30, 2020 10:03 pm

Bank of America Corp. (NYSE: BAC) posted fiscal first-quarter 2019 results before markets opened Tuesday morning. The big bank reported diluted earnings per share (EPS) of $0.70 on revenue of $23 billion. In the same period a year ago, it reported EPS of $0.62 and $23.1 billion in revenue. First-quarter results also compare to the consensus estimates for EPS of $0.65 on revenue of $23.3 billion.

Net income rose 6% year over year to a record $7.3 billion. Net interest income rose by $606 million year over year and non-interest income fell by $672 million. Income tax expense was essentially flat at $1.46 billion. Non-interest expense fell by $618 million.

Credit loss provision totaled $1.01 billion in the quarter, up by $179 million compared with the same period in 2018. In the consumer banking division alone, credit loss provision rose by $39 million year over year to $974 million.

Net charge-offs increased by $80 million to $991 million and the net charge-off ratio rose from 0.40% to 0.43% year over year. The bank did not report any release from reserves in the first quarter.

CEO Brian Moynihan said:

Economic growth and consumer activity in the U.S. continue to be solid, businesses of every size are borrowing and driving the economy, and asset quality is strong. It was a challenging capital markets environment but our team and platform are optimized to serve clients and generate stable revenues across a range of market conditions over time.

The bank did not provide guidance in its earnings release. The consensus estimate for second-quarter EPS is $0.74 on revenues of $23.62 billion. For the full 2019 fiscal year, the Wall Street forecast calls for $2.87 in EPS on revenues of $93.69 billion.

Bank of America’s strong showing in interest income was offset by a dip in total revenues. That drop was entirely the result of a $600 million decline in sales and trading revenue in the bank’s global markets division.

Shares traded about 1.6% lower shortly after Tuesday’s opening bell, at $29.37. The 52-week trading range is $22.66 to $31.91. Analysts had a 12-month consensus price target of $33.17 before results were announced.