Bank of America sees decline in first-quarter profit amid lower interest payments

Bank of America reported a drop in first-quarter profit as its consumer division weakened and the lender wrote off more loans, particularly for credit cards.

The bank, along with other major lenders like JPMorgan, is assessing the possibility of US Federal Reserve interest rate cuts this year, which could impact banks' income from interest payments but potentially stimulate economic activity and borrower demand.

Bank of America's net interest income (NII) slid 3 per cent to $14 billion in the quarter due to higher deposit costs and modest loan growth.

Banking executives noted last week that an uncertain economic outlook and changing expectations for US interest rate cuts have made it challenging to forecast future profits.

If the Federal Reserve maintains higher rates for a longer period, lenders that profited from rising interest rates in recent years could see further gains. However, earnings could decline if a potential economic slowdown discourages borrowers from seeking loans.

The second-largest US lender reported a profit of $6.7 billion, or 76 cents a share, for the quarter, down from $8.2 billion, or 94 cents per share, a year earlier.

Revenue from Bank of America's investment banking and wealth management segments increased, partially offsetting the decline in interest payments.

Investment banking fees surged 35 per cent to $1.6 billion, with expectations of further growth in investment banking revenue.

Bank of America also took a $700 million charge in the reported quarter to replenish a government deposit insurance fund, which had been depleted to cover depositors of two collapsed banks in 2023.

Profit from BofA's Merrill wealth management division rose about 10 per cent to $1 billion, driven by higher fees generated from rising equity values. The division also saw growth in assets under management to $1.4 trillion.

(With Reuters inputs)