Bank of America reported an 18% decline in first-quarter profits due to a weakening in net interest income, reflecting the challenges big banks are facing due to high interest rates. The bank stated that higher deposit costs offset higher asset yields and modest loan growth, impacting their bottom line. This drop in net interest income is a significant factor for banks in determining their overall profits.
The pressure on Bank of America and other major banks, such as JPMorgan Chase, Wells Fargo, and Citigroup, is due to higher interest rates set by the Federal Reserve. As a result, banks are paying more to retain their depositors, resulting in decreased profits. Bank of America saw a 16% decrease in non-interest bearing deposits, reflecting the impact of higher deposit rates. With investors no longer expecting a rate cut from the Fed, the pressure on banks is likely to intensify.
Despite these challenges, Bank of America’s Wall Street operations performed well, with a rise in revenue for investment banking, trading, and wealth management. CEO Brian Moynihan highlighted the record revenue generated by the wealth management team and mentioned a strong performance in sales and trading businesses. Overall, the bank’s success in this area helped offset the declines in net interest income, illustrating their ability to navigate challenging market conditions.