Bank of America shares spike on strong Q1 results

The news shaping the markets today

Ukraine said Russian forces had launched five missile strikes on the city of Lviv. A decline in investor risk appetite sent Bitcoin prices below $39,000 for the first time in more than a month.

Sri Lanka’s services PMI fell to a seven-month low of 51.3 in March, from 51.8 a month ago, exerting pressure on the LKR/USD forex pair.

New Zealand’s Business NZ Performance of Services Index improved to 51.6 in March, from 48.9 in the previous month. However, the NZD/USD pair declined in forex trading this morning.

The Colombian economy grew 8.1% year-over-year in February, versus a 7.7% expansion in the earlier month. Despite this, the COP/USD forex pair remained under pressure.

The US NAHB housing market index fell to 77 in April, from 79 in the previous month, sending the Dow Jones index lower on Monday.

What’s happening:  Shares of Bank of America gained on Monday, after the company reported strong results for its first quarter.

 What happened: The second-largest US lender posted upbeat quarterly results and issued a bullish revenue forecast.

However, Bank of America reported a decline in one of its major sources of fees for the quarter.

How were the results: The Charlotte, North Carolina-based bank reported growth in revenues for the first quarter, with both top- and bottom-line metrics exceeding market views.

• Revenues grew 2% year-over-year to $23.2 billion, beating the consensus estimates of $23.1 billion.
• Profits came in at $7.1 billion, or 80 cents per share, down from $8.1 billion or, 86 cents per share, in the year-ago period. However, the figure was significantly better than the market expectations of 74 cents per share.

Why it matters: Bank of America was the last among the US megabanks to report earnings for the previous quarter. The bank was the only major lender to report revenue growth, with a 13% surge in net interest income, despite concerns around the US economy going into recession due to soaring inflation and the ongoing Ukraine crisis.

Bank of America’s consumer banking income came in at $3 billion for the quarter, driven by record deposit balances, which surged 14% to over $1 trillion. Small business deposit balances grew 21% to $172 billion, while average loans and leases rose 4% to $19 billion.

The global wealth and investment management segment recorded $1.134 billion in net income, representing 28% growth. The bank also said it had added around 228,000 net new consumer checking accounts in the quarter.

“Going forward, and with the forward curve expectation of rising interest rates, we anticipate realizing more of the benefit of our deposit franchise,” Bank of America’s CFO Alastair Borthwick said during the earnings call.

However, the company’s total banking fees declined sharply, with global investment banking fees down 35% year-over-year to $1.5 billion, with a major pullback in industry-wide underwriting activity from record levels.

Bank of America returned $4.4 billion to shareholders through dividends and share repurchases. Management also projected around 20% growth in net interest income for the current quarter, driven by higher interest rates and a recovery in lending.

How shares responded: Bank of America’s shares spiked 3.4% to close at $38.85 on Monday, following the release of quarterly results. The stock has lost around 16% year to date.

What to watch: Investors will keep an eye on rising inflation levels, the Fed’s interest rate decision and the situation in Ukraine.

The markets today

Crude oil will be in focus today ahead of the API’s (American Petroleum Institute) data on crude stockpiles

Context: Crude oil traded higher on Monday, amid growing concerns around global supply.

Details: Rising tensions in Ukraine fuelled concerns of more sanctions by Western countries on Russia, which is expected to significantly impact oil supplies from the third largest exporter of the commodity. Russia’s oil production continued to decline, contracting by 7.5% in the first half of March.

Crude prices were also supported by reports of Libya’s National Oil Corporation halting operations in major oil fields following protests at the sites.

On the other hand, markets expected a decline in oil demand from top consumer China due to covid-19-led restrictions. China’s economy has slowed, with GDP growth coming in at 1.3% quarter-over-quarter in the January-March period, following 1.5% in the prior quarter. With this, the country refined 2% less oil in March than in the same month last year.

Brent crude oil gained $1.46 to close at $113.16 per barrel on Monday. The global benchmark rose to $114.84 per barrel in intraday trading, reaching its strongest level since March 28.

WTI oil gained $1.26, or 1.2%, to settle at $108.21 per barrel, after hitting $109.81 per barrel in intraday trading, the highest level since March 28.

In other energy trading, wholesale gasoline for May delivery came in unchanged at $3.38 a gallon, while May natural gas climbed 52 cents to $7.82 per 1,000 cubic feet.

What to watch: Traders await the release of API’s data on crude stockpiles. US crude oil inventories had increased by 7.757 million barrels in the week ending April 8, after a 1.08 million barrels rise in the prior week.

Investors will also keep an eye on the Russia-Ukraine war and rising covid-19 cases in some parts of the world.

Other Markets: US indices closed mostly lower on Monday, with the Dow Jones and S&P 500 down by 0.11% and 0.02%, respectively, and the Nasdaq 100 up by 0.13%.

Support & resistances for today

Market snapshot

What else to watch today

Bank of Indonesia’s interest rate decision, Canada’s housing starts, foreign securities purchases and ADP employment change, US housing starts, building permits and Redbook index, as well as Brazil’s IBC-Br index of economic activity.