Bank of America exceeded profit expectations as trading and investment banking shine
Bank of America exceeded expectations for the first-quarter profit as increased market volatility drove revenue from equity trading to a record, and a rebound of mergers and acquired fees boosted investment banking.
The company's shares rose by 1% before the bell on Wednesday.
The global equity markets began 2026 on an optimistic trajectory, boosted by the year-end momentum of interest rate reductions worldwide in 2025, and 'robust' corporate earnings. But this optimism quickly evaporated.
The markets were rattled by a hawkish shift in policy from the Federal Reserve. There was also mounting concern about an artificial intelligence bubble and the escalating tensions between the United States and Middle East.
Investors flocked to defensive sectors in order to avoid high-growth tech stocks.
Investment banks tend to benefit from volatile markets, since trading desks generate more revenue through increased client activity.
Bank of America’s sales and trading revenues rose 13% in the first quarter to $6.4 billion, thanks to record volumes of equity trading.
In a press release, CEO Brian Moynihan said, "We observed healthy client activity including solid consumer expenditure and stable asset-quality, indicating a robust American economy." He added, "We remain vigilant of evolving risks."
Dealmaking helps boost profits
The first three months in 2026 saw global megadeals remain strong despite the turmoil in the Middle East, and fluctuations in company valuations. Data compiled by LSEG revealed that transactions in the first three months of 2026 exceeded $1.2 trillion.
The data revealed that big transactions, specifically technology M&A, dominated the market, with 22 deals totaling more than $10 billion signed each in the quarter ended March 31. This was a record quarterly.
On a conference call with the media, CFO Alastair Borghwick stated that "we continue to gain share of market and feel good about our pipeline."
BofA Securities played a key role in advising on some of the largest mandates of the quarter, including McCormick’s acquisition of Unilever’s food business for $42.7 billion and Boston Scientific’s purchase of Penumbra medical device manufacturer for $14.9 billion.
The bank advised Devon Energy on its $26 billion acquisition of Coterra Energy. This deal is seen as a "milestone" in the consolidation of U.S. Shale.
The consortium that advised senior housing REIT Janus Living about its New York Stock Exchange listing was also led by it.
BofA’s total corporate investment banking fees increased 21% in the first quarter to $1.8 billion. The bank expected a 10% increase.
JPMorgan Chase announced its first-quarter profits on Tuesday, beating analysts' expectations. This was also aided by a strong performance in trading and dealmaking.
Wells Fargo JPMorgan Bank of America have all traded in the red in 2026. They are underperforming the S&P 500 Index, which is up 1.8% at last close.
Bank of America’s net profit increased by nearly 17%, to $8.6 Billion, or $1.11 a share, for the three-month period ended March 31. This compares with $7.4 Billion, or 89 Cents per share a year ago.
According to estimates compiled LSEG, analysts expected a profit per share of $1.01.
INTERESS INCOME RELENT
Bank of America’s net interest income - the difference between the amount the bank earns from loans and the amount it pays on deposits - rose by 9%, to $15.7 billion.
The earnings of big lenders like?JPMorgan Chase or Bank of America usually reflect changes in consumer spending, business activity and borrowing.
U.S. Banks have benefitted?from the repricing fixed-rate assets over time and from the repositioning of securities portfolios into higher-yielding investments.
Federal Reserve rate cuts in the second half 2025 helped reduce bank deposit costs, and boosted demand for loans. This led to relatively stable borrowing during the quarter despite macroeconomic pressures.
PRIVATE CREDIT EXPOSURE
Bank of America reported that private credit portfolio financing loans amounted to about $20 billion.
"We haven’t seen any losses on this portfolio," said CFO Borthwick. We're clearly?watching the environment and paying attention."
JPMorgan, Wells Fargo, and Citigroup disclosed a total of $108 billion financing exposure related to private credit or loans on Tuesday during their quarterly earnings, but they said that they were comfortable about the exposure.
As a result of tighter lending standards following the financial crisis, borrowers have been forced to look for capital from sources other than traditional banks.
Bank of America is preparing a "warchest" of $25 billion to compete with non-bank lenders, one of the most lucrative shadow banking areas.
As the $1.8 trillion private lending market is under increased scrutiny, the commitment announced earlier in the year has been reaffirmed. In early 2026, alternative asset managers' shares have been under pressure due to concerns about credit stress, fund withdrawals, and the vulnerability technology-heavy portfolios face to disruption by artificial intelligence. Reporting by Pritam Biwas in Bengaluru, and Saeed Azhar from New York. Editing by Shinjini Ganuli.
(source: Reuters)
