BofA’s Q1 earnings dismal despite expected growing interest income

As the latest major lender to suffer the pinch of higher for longer interest rates, Bank of America reported an 18% decline in first-quarter profit. With the exception of a one-time charge, the results exceeded expectations, mostly due to the bank’s Wall Street and wealth-management units demonstrating good performance. The net income decreased to $6.67 billion, or $0.76 per share, as predicted by analysts. Recently, BofA’s shares fell by about 4%, outperforming a drop in an index of large bank shares.

According to Moody’s Investors Service on Tuesday, Bank of America’s Q1 earnings were enhanced by a “credit positive slowdown in deposit repricing,” which increased the bank’s net interest margin from the fourth quarter despite flat loan growth.

Notwithstanding a slight release of commercial loan loss reserves as a result of an improving economic outlook, the bank faced difficulties as loan loss provisions rose in response to rising credit card net charge-offs.

Despite forecasting a rise in interest income later this year, Bank of America’s shares dropped about 4% as its first-quarter profits were lower than expected due to the company setting aside additional funds to cover soured loans.

BofA’s net interest income (NII), which is the gap between what it receives in loans and what it pays for deposits, decreased by 3% to $14 billion as a result of paying customers more for money storage while borrower demand remained low.