What You Need To Know Ahead of Bank of America's Earnings

Market-making, trading should help compensate for flat net interest income

Bank of America branch building

Michael Short / Bloomberg via Getty Images

Key Takeaways

  • Bank of America's market-making and trading revenue results are forecast to have nearly quadrupled and to have risen 43%, respectively, for the first quarter versus the prior quarter.
  • Net interest income for Bank of America, when it reports earnings Tuesday, likely dropped 1% from the fourth quarter and more than 4% from last year's first quarter.
  • The company's net interest margin may have dropped for the fourth time in five quarters.

Bank of America (BAC) will report its first quarter earnings on Tuesday. The company's financials may receive a boost from higher trading and market-making activities thanks to rising stock markets, but analysts expect net interest income to shrink despite higher interest rates.

Analysts expect net income attributable to common shareholders to shrink to $6.13 billion, or 76 cents per diluted share. That compares with the $7.65 billion, or 94 cents per diluted share, reported for the same period a year prior.

However, the bank's revenue from market-making activities likely rose to about $3.95 billion, up from $998 million in the fourth quarter, helping compensate for the drop in net interest income.

   Analyst Estimates for Q1 2024  Q4 2024 Q1 2023 
Revenue $25.41B $22.0B $26.26B
(Diluted) Earnings Per Share 76 cents 35 cents (70 cents excluding one-time items) 94 cents
Net Income attributable to shareholders  $6.13B  $2.8B ($5.6B excluding one-time items) $7.65B

Key Metric

Net interest income for the second-largest bank in the U.S. likely totaled $13.79 billion in the first quarter, according to consensus projections collated by Visible Alpha. That's down slightly from $13.95 billion in the fourth quarter and $14.45 billion in the same period a year ago, and in line with the first-quarter numbers reported by some of its peers such as JPMorgan (JPM) and Wells Fargo (WFC) on Friday.

Business Spotlight

Persistent inflation is making it harder for the Federal Reserve to lower interest rates. While that would ordinarily be beneficial for banks that can charge higher rates on loans, it may also hurt their business in some ways.

One example is the way in which higher rates have forced banks to pay more for deposits, shaving some off their margins.

However, in Bank of America's context, higher rates also could put a strain on the bank's long-term bond investments. As rates climb, existing bond investments lose value as they become less attractive. As of Dec. 31, 2023, Bank of America's unrealized losses—or losses they would incur if they sold those investments at the time—on long-term bond investments swelled to roughly $98 billion.

Investors will keep an eye out for that number for the first quarter, and any commentary from Bank of America management about business impact, given higher rates are here to stay for the foreseeable future.

While Bank of America's size likely will help it weather these tough conditions, it is important to note that burgeoning unrealized losses on longer-dated bonds triggered the regional bank crisis early last year.

Shares of Bank of America have gained about 25% in the past 12 months, as of the close of trading Monday.

UPDATE—April 15, 2024: This article was updated with the latest analysts' estimates.

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  1. Bank of America. "Bank of America to Report First-Quarter 2024 Financial Results on April 16."

  2. Barron's. "Bank of America Racks Up Bond Losses That Could Top $100 Billion."

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