Bank of America (BoA) missed on revenue when it reported its Q1 earnings on Tuesday (April 16) and predicted net interest income would rise half as fast this year, both of which combined to send shares down 2.7 percent when markets opened this morning. BoA joined the recent trend among America’s largest banks in Q1: weak top-line growth and a decline in trading revenue.
All in, revenue came in at $23.2 billion, missing analyst estimates of $23.3 billion. Consumer loans, on the other hand, were up 3 percent, while loans to businesses picked up 4 percent year on year – both of which drove increased revenue through higher U.S. interest rates. BoA also reported a 5 percent increase in deposits, to $1.36 trillion, from a year earlier.
Chief Executive Brian Moynihan cited demand for credit from middle-market business, and noted that was “good news for the economy overall.” However, Chief Financial Officer Paul Donofrio noted the bank remains well-positioned should the U.S. economy slow in the near future. “Bank of America has demonstrated for years now that we can grow well in an economy that is just growing moderately,” he told reporters on a conference call.
However, the bank’s trading desks were sluggish, weighed down by the early 2019 U.S. government shutdown and lower volatility, and declined by 17 percent. Equities trading revenue fell 22 percent and fixed-income trading revenue slipped 8 percent.
Digital services, however, offered a bright spot in the reporting.
BoA reported the Zelle person-to-person (P2P) payments service doubled year-on-year during Q1. Customers sent or received 58.1 million Zelle transactions via email addresses or mobile phone-numbers, up 103 percent from the 28.6 million in the first quarter of 2018. The value of those P2P payments was also on the rise, up 81 percent to $16 billion from last year’s $9 billion. BoA further reported it has 5.4 million active Zelle users, 2.7 times more than when the service launched in June 2017. The use of Zelle for business-to-consumer “digital disbursements” also grew by 135 percent between 2018 and 2019.
The firm also reported 6.3 million users of Erica, its new AI-based digital assistant. Those users have tapped into Erica 39 million times since its launch last year. Mobile banking in general was also on the rise, with BoA reporting 27.1 million mobile banking customers, a 9 percent increase from 24.8 million a year ago.
On the debit front, BoA reported first-quarter debit purchase volume of $78.5 billion, a 3 percent year-on-year increase from $76.1 billion. The company’s big U.S. credit card file posted a volume of $62.8 billion in the first quarter, up 2 percent from $61.3 billion in 2018.