Bank of America’s (BAC) Q1 2017

posted in: Earnings Call, Notes | 0

Brian Moynihan -CEO 

On lending

“On lending activity, we’ve been in a lot of discussion regarding a slowdown and our core middle market business representing the broad base of American companies, our business loans grew 7% year-over-year and our smaller business segments business banking and small business were up 3% and small business had the best production quarter in its history.”

Banks reflect the economy

“I think at the end of day, banks reflect the economy and help make the economy happen. So, we’ve been able to grow loans 5%, 6% in the core, so the middle market segment, 7% actually year-over-year. Credit card’s been picking up a little bit, home equity’s strong and residential mortgage down. So, if you look at it overall, we’ve been able to outgrow the economy, but we’re going to be dependent upon, the economy keep growing,”

 

Paul Donofrio – CFO

Increased assets

“Overall, end-of-period assets increased $60 billion from Q4. The growth was fairly evenly split between two elements. First, we saw higher trading-related assets in global markets business with incremental customer activity following a seasonal slowdown at the end of Q4; secondly, we had higher cash levels, driven by seasonal deposit growth, primarily from tax refunds.”

They expect NII to continue to improve

“Based on our models and assumptions, we believe NII should continue to improve, but the improvement is expected to be much more modest than Q4 to Q1 driven by a number of factors…As of 3/31, an instantaneous 100 basis-point parallel increase in rates is estimated to increase NII by $3.3 billion over the subsequent 12 months, which is consistent with our position at year-end.”

Average deposits up

“Average deposits continued their strong growth, up $57 billion or 10% year-over-year, outpacing the industry. Importantly, 50% of these deposits are checking accounts, and we estimate that 89% of these checking accounts are the primary accounts of households. This means these are operational accounts used to pay mortgages and car payments and other bills. So, outflows chasing rates is less likely in our view.”

…while mortgage production is down

“…the sudden rise in long-term rates in late 2016 caused a noticeable decline mortgage production from Q1. While mortgage originations was down, we continue to hold more of our loans on the balance sheet.”