Bank of America delivered record stock-trading results at the start of 2018, benefiting like two of its biggest rivals from rising volatility amid the growing risk of a trade war.
Equity market revenue grew 38 percent from a year earlier to $1.5 billion at the Charlotte, N.C.-based firm, matching expansion at Citigroup and outpacing an increase of 26 percent at JPMorgan Chase. That growth, combined with surging interest income, helped drive firmwide profit up 34 percent to $6.49 billion, or 62 cents a share, topping the 59-cent average projection from analysts surveyed by FactSet.
“Performance in equities was strong as volatility increased,” Chief Financial Offer Paul Donofrio said on an earnings call. “Results were driven by increased client activity and a strong trading performance in derivatives.”
Indeed, client trades have climbed at all three of the major Wall Street firms reporting quarterly earnings so far amid mounting concern that President Trump’s protectionist policies will fuel a trade war with China.
Stock markets began gyrating in early March after Trump followed up on stiff metals duties with tariffs on some $50 billion of China’s imports, then threatened levies on $100 billion more when Beijing retaliated.
The blue-chip Dow Jones Industrial Average, which reached an all-time high of 26,616 in late January, has since given up 9.3 percent of its value.
Like its peers, Bank of America also benefited from the Federal Reserve’s approval of its sixth rate hike since late 2015, which took the benchmark rate to a range of 1.5 to 1.75 percent. Net interest income, the amount earned from borrowers after payments to depositors, rose 5 percent to $11.6 billion.
Net interest margin, which gauges the profitability of bank lending, rose to 2.41 percent, topping the 2.39 percent projection of Keefe, Bruyette & Woods analyst Brian Kleinhanzl.
“We delivered strong results again this quarter by staying true to responsible growth,” Donofrio said on a call with reporters.
That strategy has been a hallmark of CEO Brian Moynihan’s leadership in the aftermath of 2008 financial crisis, when Bank of America accepted a $45 billion government bailout following then-CEO Kenneth Lewis’s purchases of subprime lender Countrywide Financial and investment bank Merrill Lynch.
Not only did the bank add new business and consumer clients during the three months through March, Moynihan said, “with those customers already here, we continued to increase our depth of relationship.”
Bank of America rose 0.4 percent to $29.91 in New York trading on Monday morning.
