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Bank of America’s 1Q15 Earnings Miss Analysts’ Estimates

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Earnings miss expectations

Bank of America (BAC) reported its first quarter 2015 results on April 15. With a revenue of $21.4 billion and per share earnings of $0.27, the bank missed analysts’ estimates of $0.29 earnings per share (or EPS) on $21.6 billion revenue. Citigroup (C) reported its first quarter earnings on April 16, beating analysts’ estimates.

On the day of the announcement, Bank of America fell as much as 1.5% from the previous close of $15.82. It closed down 1.1% from the previous close. The stock recovered to close at $15.79 on April 16. Bank of America forms ~5.8% of the Financial Select Sector SPDR ETF (XLF).

Peer bank JP Morgan’s (JPM) stock soared on the day of the earnings release. Wells Fargo (WFC) also posted strong 1Q15 results.

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Net income increases

Bank of America’s net income at $3.4 billion was up from the previous quarter as well as year-over-year. The bank had recorded a loss in 1Q14 due to a $6 billion litigation expense. The above graph compares the bank’s first quarter interest, non-interest, and net income with the previous and year-ago quarter.

Total revenue declines year-over-year

Total revenue was higher in 1Q14 than the first quarter of 2015. The reduction in revenues was driven by two things:

  • a reduction in gain on sale of an equity investment
  • adjustments on the company’s debt portfolio due to the impact of lower long-term interest rates

Excluding these two items, revenue decreased by 1% year-over-year. This decline was from lower net interest income and lower sales and trading results.

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