Bank of America Corp (NYSE:BAC) shareholders had good reason to expect a great first-quarter earnings report from BofA on Tuesday morning. Especially in the shadow of impressive Q1 results from Citigroup Inc (NYSE:C) and JPMorgan Chase & Co. (NYSE:JPM). While BAC stock reversed after opening higher on Tuesday, the results surely couldn’t have disappointed.
Indeed, BAC shareholders would be hard pressed to find anything wrong with the numbers at all.
Revenue was up, income was up and results were better than expected across the board.
Perhaps most important of all, BAC stock was firmly up on Tuesday morning, tacking on more gains following Monday’s sizeable advance.
If there was any doubt Bank of America is (finally) back on track, it was wiped away today.
Bank of America Q1 Earnings
A quick look at the headline numbers for the quarter ending in March:
- Bank of America earned 41 cents per share versus expectations of only 35 cents per share. That figure was 46% better year-over-year.
- Revenue of $22.2 billion grew 12.5% YOY and topped estimates of $21.6 billion.
Picking a highlight isn’t easy, in that all facets showed tremendous progress. Its consumer loan portfolio grew by $18 billion, while brokerage assets were up 21% on a year-over-year basis. Its wealth and investment management assets grew by $29 billion in new-asset inflow, and net interest income was up 5% thanks to rising interest rates.
Better still, noninterest income — fee-based and stock/bond trading — grew 9% from Q1 2016’s levels, mirroring though topping Q1 trading revenue for JPMorgan and Citi.
CEO Brian Moynihan commented on the numbers:
“Our approach to responsible growth delivered strong results again this quarter. Consumer spending was up, our wealth management business had strong asset management flows, investment banking fees rebounded nicely, and we continued to provide credit and capital to our corporate and institutional clients to help them drive the economy forward.”
That’s only half the good news.
Bank of America Passes Muster on an Even Deeper Look
While the most-watched measures of interest to current and prospective BAC shareholders were rock-solid, the more obscure (though arguably more important) figures of internal health were just as impressive.
More so than most other major banks, Bank of America struggled to find its way out of the mess left behind by the 2008 subprime loan meltdown. BofA did poorly on a couple of the Federal Reserve’s so-called “stress tests,” and as such was limited in terms of how much of a dividend it could dish out, in turn upping the size and quality of the capital base it was required to build.
The matter seems to be firmly in the past for the bank now.
BofA’s return on average common equity was 7.3%, and its return on average tangible common equity rolled in at 10.3%. That’s a hair above Goldman Sachs’ ROTCE target of 10% for BAC. While the figure is still shy of the company’s aggressive ROTCE goal of 12%, Q1’s score showed progress from Q4’s ROTCE reading of 9.9%.