Bank of America's profits doubled in the first quarter, the bank said Thursday, as the improving economy allowed it to release billions from its loan-loss reserves that it originally set aside in the early days of the pandemic.
Bank of America is the latest of the big banks to say it has released billions from its reserves, following JPMorgan Chase and Wells Fargo, which announced results Wednesday. The release of reserves helped both of those banks' profits soar compared to the year-ago first quarter.
The Charlotte-based banking giant earned $8.1 billion in the quarter, equal to 86 cents per share, compared to a profit of $4.01 billion, or 40 cents a share, in the same period a year earlier. Analysts were looking for BofA to earn 66 cents a share.
The bank had a net one-time gain of $1.86 billion for releasing loans from its loan-loss reserves.
Wells Fargo, which has a large corporate presence in Charlotte, had its best quarter in a year and a half, posting a profit of $4.74 billion and freeing up more than a billion dollars that had been set aside for potential loan defaults at the beginning of the coronavirus pandemic. The San Francisco-based bank on Wednesday said it earned $1.05 per share on revenue of $18.06 billion in the quarter, both surpassing Wall Street’s forecasts.
Like JPMorgan Chase and Goldman Sachs, which also reported its results on Wednesday, BofA had a strong quarter in its investment banking division. Total profits in the division rose to $2.05 billion from $1.71 billion in the same period a year earlier. The bank saw revenue gains on its trading desks, a reflection of the healthy volatility the markets had last quarter.
One thing that negatively impacted BofA and hurt the other banks as well in due time is low interest rates. The bank's net interest income fell from $12.13 billion last quarter to $10.2 billion in this quarter. BofA's balance sheet tends to skew toward financial products with a shorter duration, so more of the bank's balance sheet changed to lower interest rate products than its competition.
Overall revenue at the bank was $22.82 billion, relatively flat compared to the $22.77 billion reported last year.
Shares of Bank of America rose about 1% in premarket trading.