Bank of America Corp. posted a 40 percent increase in first-quarter profit, fueled by stronger trading revenue, and added employees for the first time in more than five years as chief executive Brian Moynihan expressed optimism about the US economy.
Fixed-income trading revenue rose 29 percent to $2.93 billion, the second-biggest US bank said Tuesday in a statement, beating analysts’ $2.6 billion average estimate. Equity trading revenue also was better than expected, climbing 7.4 percent to $1.1 billion.
“The US economy continues to show consumer and business optimism, and our results reflect that,” Moynihan said in the statement. Bank of America added 549 employees in the quarter, the first increase since the third quarter of 2011.
Last week, JPMorgan Chase & Co. and Citigroup Inc. also reported robust first-quarter revenue from bond trading. JPMorgan, the largest US bank by assets, posted a 17 percent gain in fixed-income trading revenue, while Citigroup generated the most revenue from that business in three years. That contrasts with Goldman Sachs Group Inc., which on Tuesday posted worse-than-expected fixed-income results.
Bank stocks have climbed since November’s US election in part on expectations that Federal Reserve rate increases would boost profits. Charlotte, N.C.-based Bank of America, which is among the most sensitive to interest-rate changes, has led the surge among the country’s biggest lenders, gaining 38 percent through Monday.
Net interest income climbed 5.5 percent to $11.1 billion from a year earlier, exceeding the firm’s forecast. Net interest margin — the difference between what a bank charges for loans and pays depositors — rose 16 basis points to 2.39 percentage points from the previous quarter, the biggest jump among large US banks. The firm expects a $150 million increase in interest income in the second quarter from the previous three-month period, chief financial officer Paul Donofrio said on a call with analysts.
Brian Kleinhanzl, a Keefe, Bruyette & Woods Inc. analyst, called the forecast “disappointing.”
The bank’s “guidance raises concerns about the long end of the curve,” said Kleinhanzl, whose second-quarter estimate of net interest income is $11.45 billion. “If the long end of the curve does not pick up then our, and the street’s, NII forecast may prove to be too optimistic.”