Bank of America (BAC), the nation’s second-largest bank by assets, will likely say earnings growth flattened in the first quarter compared to the same quarter last year, weighed down by recessionary fears, a banking crisis, and a slowdown in lending.
- Bank of America is projected to report EPS of 81 cents a share, little changed from the same quarter last year, on revenue of $25.4 billion.
- Net interest income (NII) likely surged 23.5% year-over-year to $14.3 billion, driven by rising interest rates.
- The company's net interest margin (NIM), a key profitability metric for banks, likely rose to 2.2%, up from 1.7% a year earlier.
Earnings per share (EPS) is projected at 81 cents, little changed from the same quarter of 2022. That number may be cushioned by a 23.5% surge in net interest income (NII) to just under $14.3 billion. That will bring the company’s net interest margin (NIM), a key profitability metric for banks, to 2.2%, from 1.7% a year earlier. Revenue is projected at almost $25.4 billion, up 9.3% year-over-year. The company will report earnings before markets open on Tuesday, April 18.
|Bank of America Key Metrics|
|Estimate for Q1 FY 2023||Q1 FY 2022||Q1 FY 2021|
|Earnings Per Share ($)||0.81||0.80||0.86|
|Net Interest Margin (%)||2.20||1.69||1.68|
While a rising interest rate environment may seem to be good for a bank, as they can charge higher interest rates on loans, Bank of America's sensitivity to rate hikes stems from the higher yields it must pay to its large depositor base to retain those customers.
The Federal Reserve’s rate hikes over the past year have boosted the bank’s interest margins, enabling the company to earn more on loans than it pays out to depositors. Among the six largest U.S. lenders, net interest income is projected to have risen 30%, on average, compared with the same period last year.
Bank lending rose at a healthy pace in the first two months of the year, driven by higher demand for real estate and consumer loans. That reversed in March after the collapse of Silicon Valley Bank and Signature Bank raised fears of contagion throughout the industry, reducing loan demand.
Even so, deposits at many of America’s biggest banks surged during the crisis amid a flight to safety. Bank of America had $15 billion in deposit inflows days after SVB’s collapse.
As of Thursday's market close, Bank of America shares have fallen almost 14% year-to-date, compared with a 5% decline for the S&P 500 financial sector. They’re one of the worst performers among major banks, trailing Citigroup (C) (+4.6%); Goldman Sachs (GS) (-3.2%); JPMorgan Chase (JPM) (-3.8%); and Wells Fargo (WFC) (-3.9%).
Nasdaq Inc. "Nasdaq Earnings Calendar: Tuesday, April 18, 2023."
Reuters. "Wall Street Bank Earnings Under Pressure After Crisis."
Board of Governors of the Federal Reserve System. "Assets and Liabilities of Commercial Banks in the United States."
Bloomberg. "BofA Gets More Than $15 Billion in Deposits After SVB Fails."