Bank of America’s profit took a hit as the lender saw a decline in customer interest payments, leading to a 3% drop in net interest income to $14 billion. The uncertain economic outlook and changing expectations for U.S. interest rate cuts have made it challenging for banking executives to predict future profits.
If the Federal Reserve decides to keep rates higher for a longer period, lenders could see an increase in profits. However, a potential economic slowdown could deter borrowers from taking out loans, resulting in diminished earnings for banks.
Despite the decrease in interest payments, Bank of America saw an increase in revenue from its investment banking and wealth management divisions. Investment banking fees surged by 35% to $1.6 billion, surpassing expectations set by Chief Financial Officer Alastair Borthwick.
Other major banks like JPMorgan Chase and Citigroup also experienced growth in revenue from their investment banking segments in the first quarter, driven by gains in debt and equity capital markets. Goldman Sachs reported a profit beat, with underwriting, deals, and bond trading lifting its earnings per share to the highest level since late 2021.
Bank of America also took a $700 million charge in the reported quarter to replenish a government deposit insurance fund, which was drained by $16 billion to cover depositors of two collapsed banks in 2023. Overall, the second-largest U.S. lender earned a profit of $6.7 billion, or 76 cents a share, for the first quarter, down from $8.2 billion, or 94 cents per share, a year earlier.