Bank of America (BAC) Gains as Earnings Beat Estimates on Strong Investment Banking Results, Announces $25 Billion Buyback Plan

April 15, 2021 7:12 AM EDT

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Bank of America (BAC) is up over 1% in pre-open Thursday after its Q1 earnings topped market estimates.

Bank of America said made a Q1 profit of $8.1 billion, or $0.86 per share to easily exceed the $0.66 expected from the market analysts. Revenues for the quarter came in at $22.8 billion, again higher than the $22.1 billion expected from the market.

As with rivals JP Morgan and Goldman Sachs, Bank of America also witnessed a surge in demand for investment banking and trading services as the stock market hit fresh record highs. Bank of America also released $2.7 billion out of $11.3 billion in total loan loss reserves to further boost its profits.

“Our team produced exceptional results this quarter: record or near-record levels of deposits, investment flows, investment banking revenue, digital users and client engagement. Meanwhile, brand loyalty, customer satisfaction and employee engagement reached new highs,” the company said in a statement.

"While low interest rates continued to challenge revenue, credit costs improved and we believe that progress in the health crisis and the economy point to an accelerating recovery. The strength of our balance sheet, our complementary and diverse set of businesses, and our talented teammates position us to perform well in that environment."

Bank of America reported a 12% plunge in consumer banking revenue to $8.1 billion in Q1, however its investment and trading unit excelled. Fixed income from trading revenue soared 22% to $3.30 vs $2.64 billion expected from the market analysts.

Equities revenue gained 10% to $1.8 billion, again higher than the $1.63 billion the analysts expected. Investment banking fees came in at $2.2 billion, representing a jump of 62% on the back of the $900 million generated via equity underwriting fees.

In a separate announcement, the company said it will seek to repurchase up to $25 billion of its common stock over time.

“This authorization reflects the company’s commitment to return to shareholders excess capital that is not needed to support economic growth, deliver for customers and communities, invest in the future and sustain strength and stability through the cycle. The Board also authorized repurchases to offset shares awarded under equity-based compensation plans,” it said in a statement.

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