BofA's profit boosted by surge in trading

[NEW YORK] Bank of America reported a 44 per cent rise in quarterly profit as higher interest rates bulked up earnings from loans and an increase in trading boosted revenue.

The second-largest US bank said net income attributable to shareholders rose to US$4.35 billion in the three months ended March 31 from US$3.02 billion a year earlier.

Earnings per share rose to 41 cents per share from 28 per share. Analysts on average had expected earnings of 35 cents per share, according to Thomson Reuters I/B/E/S. It was not immediately clear if the reported figures were comparable.

Total revenue, net of interest expense, rose 7 per cent to US$22.25 billion. "We saw good client activity in our balanced portfolio of businesses ... The US economy continues to show consumer and business optimism, and our results reflect that," Chief Executive Brian Moynihan said in a statement.

The Charlotte, North Carolina-based bank's shares were up about 1 per cent at US$23.05 in premarket trading.

Big US banks have been vitalized by increased market activity prompted by the so-called "Trump trade". They have also benefited from higher interest rates, which the US Federal Reserve has indicated will be raised again this year.

Interest rates were hiked in December and March - a 0.25 percentage point uptick in each case - marking only the second and third raise in seven years, after being kept stagnantly near zero.

Bank of America relies heavily on higher interest rates to maximize profits as it has a large stock of deposits and rate-sensitive mortgage securities.

Higher interest rates increased the amount of money banks can earn from their various loans, known as net interest income. BofA made US$11.06 billion as net interest income in the quarter, up 5.5 per cent from a year earlier.

JPMorgan Chase and Citigroup last week also reported better-than-expected quarterly profit, driven by increased trading activity.

Excluding special items, the bank's trading activities brought in US$4 billion, a 21.2 per cent rise.

Revenue from fixed-income trading surged about 29 per cent, while equity trading revenue rose about 7 per cent, boosted by volatility around the Fed's interest rate hikes.

Bank of America posted record investment banking fees of US$1.6 billion.

The lender's non-interest expenses was nearly flat at US$14.85 million.

Moynihan said last year he would make trimming costs a top priority and would shrink annual expenses by about an additional US$5 billion by 2018.

Up to Monday's close, the bank's stock had risen about 34 per cent since President Trump's election on Nov 8.

REUTERS