The quarter was solid, but charge-offs caught investors off guard.
Bank of America (BAC -3.53%) beat on the top and bottom lines, but investors are more focused on elevated expenses and charge-offs of bad loans that exceeded expectations. Shares are trading off slightly, down about 3% as of 12:30 p.m. ET.
Credit cards felt a pinch
Bank of America earned $0.83 per share in the first quarter on sales of $25.82 billion, surpassing the Wall Street consensus estimate for a $0.77 per share profit on sales of $25.46 billion. Revenue was down 2% year over year as higher investment banking and trading revenues were unable to offset lower net interest income.
Revenue in the consumer banking segment was down 5%, and average deposits were down 7% but remain well above pre-pandemic levels. The bank added 245,000 new checking accounts in the quarter and saw strong gains in its global wealth management, banking, and markets divisions.
“We reported a strong quarter as our businesses performed well, adding clients and deepening relationships,” CEO Brian Moynihan said in a statement. “Continued strong earnings and strong expense management both position our company to continue to drive our market leading positions across our businesses.”
However, there was some indication of continued economic uncertainty. Charge-offs for bad loans totaled $1.5 billion, up 26% from the final three months of 2023 and significantly above the $1.26 billion analysts had expected.
Is Bank of America stock a buy on its post-earnings dip?
Bank officials attributed the weaker-than-expected charge-off number to an increase in credit card issues they said was more of a hangover from the final three months of 2023, stating that the number is flattening out.
Bank of America also dealt with one-time issues in the quarter, including a $700 million special assessment from the Federal Deposit Insurance Corp. that all large banks are paying to offset last year’s regional bank failures.
All in all, Bank of America is showing resilience through what has been a turbulent economic environment. Investors looking for exposure to large national banking franchises should keep Bank of America in mind.
Bank of America is an advertising partner of The Ascent, a Motley Fool company. Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bank of America. The Motley Fool has a disclosure policy.
