Bank of America exceeds expectations but Goldman Sachs underwhelms
Bank of America
Bank of America reported Q1 earnings that exceeded expectations, following a trend among peer banks earlier in the month. The bank's profit increased 15% to $8.2 billion, or 94 cents a share, surpassing analysts' predictions of 81 cents per share. Meanwhile, revenue grew 13% to $26.3 billion, higher than the expected $25.2 billion projected by FactSet analysts.
This revenue boost was aided by a 25% increase in net interest income, rising to $14.4 billion. This surge in net interest income was like JPMorgan Chase and other banks, which were helped by the Federal Reserve's rate hikes over the past year. Bank of America's surge in revenue is evidence of the company's "decade-long commitment to responsible growth," said CEO Brian Moynihan in a statement.
Despite the recent bank collapses, Bank of America, JPMorgan Chase, Citigroup, and Wells Fargo have posted better-than-expected financial results, which eased concerns about the health of the banking system. While Bank of America's deposits were down 1% at $1.9 trillion from Q4 2022, the bank still had excess deposits of $900 billion at the end of Q1 2023, which were held in cash and other securities with a blended yield of 2.9%.
Nonetheless, large banks are also dealing with a weakening economy, and while Bank of America's provision for credit losses was $931 million for the quarter, it reflected a net reserve build of $124 million and $807 million in net charge-offs.
Goldman Sachs
Goldman Sachs' Q1 results beat earnings expectations, but fell short on revenue, largely due to a disappointing performance from the trading division, particularly fixed-income trading. This contrasts with other major U.S. banks that rely more heavily on consumer banking or asset management.
Despite an expected boost from chaos in global markets, fixed-income trading brought in $3.93 billion, missing analyst estimates of $4.16 billion. Investment banking fees of $1.58 billion, while ahead of estimates, represented a 34% slowdown from the previous year. Net interest income also fell short, with $1.78 billion below the expected $2.11 billion.
References:
www.barrons.com
Russell Shor
Senior Market Specialist
Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.
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