Bank of America Q1 2021 earnings beat forecasts with net income of $8.1bn for the three months to end March.
Revenue, net of interest expense, increases 0.2% y-o-y to $22.8bn. Noninterest income rises by 19% to $12.6nm, reflecting strong capital markets results. In addition, the bank posts higher investment and brokerage income. Moreover, provisions for credit losses fall by $6.6bn to a benefit of $1.9bn. This reflects a reserve release of $2.7bn amid an improved macro-economic outlook and balance declines.
On the other hand, ongoing margin pressure is taking its toll. Net interest income declines by an eye-watering 16% to $10.2bn, driven primarily by lower interest rates.
Bank of America Q1 2021 retail banking highlights
The bank’s retail banking focused Consumer Banking division posts net income of $2.7bn. Deposits soar by 25% y-o-y to $924bn. However, loans fall by 8% to $291bn. Record consumer assets rise by a whopping $112bn or 53% to $324bn. This is driven by market valuations and client flows of $25bn since the first quarter last year.
Bank of America has issued 473,000 Paycheck Protection Program loans to small businesses since inception. This includes 130,000 in the first quarter. And the loans equate to $21bn in outstanding balances. Furthermore, the bank reports further progress in boosting its digital banking metrics. It ends the first quarter with 70% of its customers actively using the bank’s digital platforms.
Bank of America Q1 2021: Merrill Lynch adds 6,400 net new households
The bank’s Global Wealth unit also posts a strong quarter. Specifically, it posts net income of $881m. Strong metrics include record client balances of $3.5trn, up $822bn, or 31%, driven by higher market valuations and positive client flows.
Total client balances of $3.9trn are up by 32% with deposits up 24% to $326bn. Meantime, loans are up 6% to $188bn. The bank’s Merrill Lynch unit adds 6,400 net new households, up 26% from the prior quarter. At the same time, the Private Bank added 675 net new relationships, up 74% from the past quarter.
Q1 digital banking highlights
The bank reports a 3% rise in active digital banking users to 40.3 million. Notably, digital sales now account for 49% of all retail banking sales. In the first quarter, customers made 2.6 billion digital log-ins. Zelle continues to go from strength to strength with 13.5 million active users. Users sent and received 170 million transfers worth $49.5bn, up 66% and 83% y-o-y respectively.
The bank’s distribution strategy relating to branches merits a mention. The bank is not using the pandemic to justify shrinking its physical footprint. On the contrary. Bank of America ends the first quarter with 4,324 branches, up by a net 27 outlets from a year ago.
The Merrill Lynch unit also reports strong digital growth. A record 80% of Merrill Lynch households are actively using an online or mobile platform. In addition, Merrill Lynch mobile app usage hits 40%, up from 31%.
Q1 less positive metrics
In summary, non-interest expenses and the bank’s cost income ratio move in the wrong direction. Noninterest expenses increase 14% to $5.1bn. This is driven largely by a $240m impairment charge for real estate rationalisation. At the same time, the bank incurs incremental expense to support customers and employees due to the pandemic. The cost income-ratio takes a hit, rising from 49% a year ago to a sobering 64%.
The Bank of America share price, at $39.88, is up 32.8% for the year to date, giving a market cap of $344bn.