Bank of America (BAC) said net profit and revenue increased in the first quarter despite lower deposits.
Overall revenue was $8.2 billion, up 15% from the first quarter of 2022. Deposits fell by $20 billion in the first three months of the year. The company’s shares rose 2.6% in pre-market trading.
One of the major drivers of revenue for the second-largest US bank was net interest income, the difference between what the bank earned on loans and what it paid on deposits.
Aggressive interest rate hikes by the US Federal Reserve over the past year have pushed this earnings metric for Bank of America and other giants such as JP Morgan (JPM) and Wells Fargo (WFC). was pushed up. Bank of America net interest income increased 25% from the prior year period.
The concern now is that these margins could start to decline across the industry as banks begin to pay more aggressively for deposits and attract new customers with higher interest rates. . Bank of America’s net interest income was broadly flat from the fourth quarter, down just $233 million. However, the company has revised its forecast, saying it expects revenue from the measure to decline for every 100-basis-point rise in interest rates.
Bank of America interest expense increased $12.8 billion from the prior year period and $3.8 billion from the fourth quarter. This indicates that banks are paying significantly more for deposits.
Even before the March turmoil, lenders large and small were losing depositors to money market funds willing to offer higher yields. At the end of the quarter, he had $1.9 trillion in deposits, down $162 billion from the year-ago quarter.
Steven Bigger, director of financial services research at Argus Research, told Yahoo Finance on Monday:
This is breaking news.In the future.
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