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By Elizabeth Dilts Marshall
(Reuters) -Bank of America Corp provided a bullish outlook after reporting a smaller-than expected 13% fall in first-quarter profit on Monday, as growth in consumer lending overshadowed a decline in global dealmaking.
Chief Executive Brian Moynihan said Bank of America customers had spent at the highest level ever recorded for the first quarter, representing a double-digit percentage increase from a year ago.
"Could a slowdown in the economy happen? Perhaps. But right now, the size of the economy is bigger than pre-pandemic levels. Consumer spending remains strong, unemployment is low and wages are rising," Moynihan told analysts on a conference call.
Moynihan's comments contrasted with those of JPMorgan Chase & Co Chief Executive Jamie Dimon, who last week warned of economic uncertainties arising from Russia's invasion of Ukraine and soaring inflation.
Shares in Bank of America were up 3.1% by midday.
The bank said its net interest income, the difference between what it earns from lending and pays out on deposits, would grow by $650 million in the second quarter. The U.S. Federal Reserve's rate hikes are expected to help banks' bread-and-butter business --taking deposits and lending.
Because of its high proportion of consumer deposits, Bank of America is likely to benefit more from rate rises than rivals, analysts say. Profit was also boosted by the release of $362 million from its reserves it had set aside for bad loans.
The bank reported a 9% rise in consumer banking revenue to $8.8 billion in the quarter ended March.
Profit applicable to common shareholders fell nearly 13% to $6.6 billion, or 80 cents per share, for the quarter ended March 31 from $7.56 billion, or 86 cents per share, a year earlier.
Analysts on average had expected a profit of 75 cents per share, according to the IBES estimate from Refinitiv.
The strong performance by the consumer business overshadowed a weaker performance in investment banking. Investment banking fees plunged 35% to $1.5 billion in the quarter.
Big U.S. banks benefited from a deal-making boom last year after the Federal Reserve pumped liquidity into capital markets to mitigate the economic impact of the COVID-19 pandemic.
This year, however, investment banking businesses have taken a hit as geopolitical turmoil fueled by Russia's invasion of Ukraine slammed the brakes on last year's breakneck pace of deal-making and a boom in the IPO market.
Bank of America's global banking segment, which houses the investment banking business, reported $165 million of provisions for credit losses, primarily because it built reserves tied to its exposure to Russia and a growth in loans.
The bank said it has approximately $700 million in total exposure to Russia, comprised mostly of loans to 9 clients and a "de minimis" amount of counterparty risk. Executives said it has been reducing its exposure to Russia since 2015 in response to the Russia's invasion of Crimea.
Bank of America rounds out a mixed earnings season for Wall Street banks with peers JP Morgan Chase, Goldman Sachs, Wells Fargo, Morgan Stanley and Citigroup posting profit declines.
(Reporting by Noor Zainab Hussain and Niket Nishant in Bengaluru and Elizabeth Dilts Marshall in New York; Additional reporting by Mehnaz Yasmin; Editing by Matt Scuffham and Alistair Bell)