The big banks in the United States are taking advantage of the interest rate hikes from the Federal Reserve. The entities pass on this increase in the price of money in their credits, but they are hardly paying for the deposits to their clients, which is improving the income statements. Bank of America’s attributable consolidated net profit grew 16% in the first quarter to $7,656 million (close to €7,000 million at current exchange rates), according to the accounts published this Tuesday by the entity.
Bank of America’s revenues grew 13%, to $26,258 million, driven by the interest margin, which shot up 25%. Other income fell, especially due to the 20% drop in investment banking commissions, to about 1.2 billion dollars.
Revenue from fixed income, currency and commodity trading unexpectedly rose 27% to $3.44bn, the highest in a decade. This was due to improved results from mortgage, credit and municipal products, and increased secured financing activity for customers. In contrast, equity revenues declined 19% to $1.627 million due to lower trading performance and lower client activity in derivatives and cash.
The rise in interest rates is boosting the results of the big banks despite the fact that it was the trigger for the financial turbulence of the last month. Silicon Valley Bank and Signature Bank fell largely due to the losses suffered in their fixed-income portfolios due to the rate hike. First Republic also has significant unrealized losses in its mortgage portfolio.
In the cases of these entities, fears for their solvency led to an outflow of deposits. Some of that money sought refuge in large entities, especially JP Morgan Chase. However, the lack of attractive remuneration for deposits is also making clients look for alternatives. In the case of Bank of America, deposits fell by about 30,000 million, 3%, in the first quarter of the year. The evolution curve shows that the decline was gradual, not the result of a flight due to the financial storm.
Goldman suffers the hiatus
While JP Morgan, Citi, Wells Fargo and Bank of America have beaten analyst expectations with strong results, Goldman Sachs’ profits have fallen 19% in the first quarter, as he has also published this Tuesday. The entity obtained 3,087 million dollars of results attributable to its shareholders.
Goldman Sachs is the most dependent on investment banking income and that business continues with very slow activity due to economic and financial uncertainty. Investment banking revenues fell 26% in the first quarter to $1.578 billion. JP Morgan and Citi have posted investment banking revenue declines of 25% and 24%, respectively, but are far less reliant on that business.
The bank’s result has been affected by extraordinary amounts of 470 million dollars from the sale of a part of its Marcus consumer loan portfolio, of around 4,000 million dollars, which, on the other hand, meant a release of provisions for 440 million dollars, which helped to prevent the drop in profit from being greater.
Fixed income trading revenue fell 17%, making Goldman the only major Wall Street bank to have so far posted a drop in this business, likely hit by the financial turbulence of the midmarket banking crisis. Equity trading revenue beat expectations, helping to soften the blow.
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