Bank of America Stock falls on earnings slump. What to know.

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Bank of America

achieved strong results in the first quarter on Thursday, but the stock tumbled as investors focused on the bank’s Covid-19 expenses and weaker-than-expected net interest income and loan growth.

Earnings at Bank of America (tick: BAC) doubled more than a year ago, rising to $ 8.1 billion from $ 4 billion in the first quarter of last year. The bank earned 86 cents per share on sales of $ 22.8 billion – exceeding analysts’ expectations for earnings of 66 cents per share on $ 21.9 billion in revenue.

Shares rose 4% in recent trading, to $ 38.28, after rising to 1.2% ahead of market. The

S&P 500

increased by 0.7%.

As

JPMorgan Chase

(JPM) and

Wells Fargo

(WFC), which reported earlier this week, the Bank of America’s results were helped by an improved economic background and the release of reserves built up last year to cover potential loan losses. The bank released $ 2.7 billion from its reserves, up from $ 3.6 billion at this time last year.

But even though the economic background is much better than feared, customers still do not take out loans. Bank of America’s revenue in its consumer bank fell by $ 1.1 billion to $ 8.1 billion due to the impact of lower rates and loan balances.

Net interest income was $ 10.2 billion, compared to $ 12.1 billion in the previous quarter, because the bank, like its peers, is still affected by low interest rates, which reduces the spread between what banks earn on lending and in deposits paid out.

“While low interest rates have still challenged revenues, credit costs have improved and we believe that progress in the health crisis and the economy points to an accelerated recovery,” CEO Brian Moynihan said in a statement.

Weaker net interest income was offset by a 19% increase in non-interest income, which rose to $ 12.6 billion thanks to strong capital markets and investment banking. Bank of America has a record investment money of $ 2.2 billion and a record money of $ 900 million, which climbed by 218%. Meanwhile, fixed income trading rose 22% to $ 3.3 billion, while equities climbed 10% to $ 1.8 billion.

The bank also saw non-interest expenses increase by 15% to $ 15.5 billion due to increased Covid-19 and compensation-related costs.

Citigroup

(C) also reported the results on Thursday, while

Morgan Stanley (MS)

reported Friday. JPMorgan Chase,

Goldman Sachs

Group (GS) and Wells Fargo kicked off bank earnings on Wednesday.

Write to Carleton English at [email protected]