Bank of America profit tops estimates on growing loan book By Reuters

© Reuters. A Bank of America logo is pictured in the Manhattan borough of New York City

(Reuters) – Bank of America Corp (NYSE:) reported a better-than-expected rise in quarterly profit on Tuesday, as a growing loan book and cost cuts made up for a drop in revenue in investment banking.

The second-biggest U.S. bank benefited from 3 percent growth in consumer loans and 4 percent growth in loans to businesses in the first quarter, allowing it to capture more revenue from higher U.S. interest rates. Revenue rose in two of the lender’s four main businesses.

The bank has benefited from the central bank’s four rate hikes in 2018, while a strong job market has also kept bad loans in check and borrowing healthy. BofA relies heavily on higher interest rates to maximize profits as it has a large deposit pool and rate-sensitive mortgage securities.

Net interest income – the difference between what a lender earns on loans and pays on deposits – rose 5 percent to $12.38 billion. Average deposits also rose nearly 5 percent to $1.36 trillion.

However, BofA’s trading desks, like its peers, have had a slow start to the year due to the U.S. government shutdown and a drop in volatility, compared with a year earlier when changes in the U.S. tax code and trade war concerns spurred more trading.

Overall trading revenue declined 17 percent, with equities trading revenue falling 22 percent and fixed income trading revenue slipping 8 percent.

” It was a challenging capital markets environment,” Chief Executive Officer Brian Moynihan said in a statement.

Net income applicable to common shareholders rose 6 percent to $6.87 billion.

Excluding one-time items, the bank earned 71 cents per share, beating the 66 cents per share analysts on average had expected, according to IBES data from Refinitiv.

Revenue, net of interest expense, was flat at $23 billion and was below analysts’ expectations of $23.30 billion.

Non-interest expense fell 4.5 percent to $13.2 billion.

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