Bank of America saw a 12% drop in first-quarter earnings from a year earlier, a much smaller drop than its rivals had reported the previous week.
The Charlotte, North Carolina-based bank said it made $ 7.1 billion in profits compared to $ 8 billion over the same period last year. Another large Wall Street bank reported a drop in profits this quarter, but BofA’s results were helped by the fact that it owns only a modest amount of Russian assets.
“This is not a bad outcome for Bank of America, particularly the solid and continued growth in lending,” David Wagner, portfolio manager at Aptus Capital Advisors, which owns BofA shares, said in an email.
BofA’s consumer banking division, the bank’s largest revenue and profit business, also helped boost earnings. The division’s net income increased 11% year-over-year, thanks to increased loan and interest rate revenue. Deposits grew 14% to $ 1 trillion.
The bank did not have to set aside much funds this quarter to cover potential losses as well, unlike JPMorgan Chase and Citigroup, which had to set aside money to cover the risk of a recession as well as for its exposure to Russia. BofA had to set aside $ 700 million to cover its exposure to Russia, compared to the $ 1.9 billion set aside by Citigroup.
Banks only set aside funds for losses when they think default rates, which are currently low, will start to rise. And JPMorgan admitted it during the call, saying it was a “preventative move” if the economy slowed.
Bank of America has planned reduce overdraft fees charged to customers to $ 10 from $ 35 as of May. It will also stop charging commissions for insufficient funds, which are charged when it rejects a transaction, better known to consumers as bouncing a check. Although checks are no longer widely used, NSF rates can come from automated payments, such as utility bills.
Bank of America has said that approximately 25% of its income from overdraft / NSF commissions each year comes from NSF commissions. Overall, Bank of America estimates that the move will reduce its overdraft fee income by 97% from where it was in 2009, the year before it began taking incremental steps to curb overdraft fee income.
“This is the last step in our journey,” said Holly O’Neill, BofA’s president of retail banking, in January. “We have good financial solutions for customers without having to depend on overdrafts, but we will still have overdrafts if necessary.”
Like other banks, BofA saw a drop in investment banking revenues and commissions during the quarter as companies refrained from making deals.
BofA’s share price rose 3% during Monday morning trading to nearly $ 39 per share.
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