Bank of America Q1 2021 Earnings Summary (NYSE: BA)

Prepared Remarks Summary

Financial Results:

• Revenue: $22.9Bn.
• Revenue growth driven by strong sales and trading results, record investment banking fees and record asset management fees.
• NII: $10.2Bn, down $1.9Bn YoY due to rate environment and lower loan balances.
• Net Income: $8.1Bn, including a $2.7Bn reserve release ($1.9Bn provision benefit).
• EPS: $0.86

Other Financial Information:

• ROTE: 17%
• ROA: 1.13%
• Increased digitization: added 1 million active digital customers, led by increase use by bombers and senior. Total active digital consumers now 40 million.
• Loan balances affected negatively by liquidity and high customer payments.
• Pipeline originations are improving but still below pre-pandemic levels.
• Reinstated all credit standards to pre-pandemic levels.
• Card applications and mortgage originations continue to increase.
• NII should improve through 2021 due to benefits from a steepened interest rate curve.
• Targeting expenses of $55Bn.
• “We are targeting 2021 expense at roughly to where it was in 2015, 6 years later and a lot bigger company later. That discipline in operational excellence is what we do, and you should expect us to continue that.” — Brian Thomas Moynihan, CEO

Balance Sheet:

• CET1 ratio: 11.8% (vs. 9.5% minimum requirement).
• Supplemental ratio: 7%.
• “Compared to last year, Bank of America’s balance sheet has higher capital ratios, higher reserves with lower charge-offs and record liquidity.” — Brian Thomas Moynihan, CEO
• Returned $5Bn to shareholders.
• Total Assets: $2.97Tn (+$150Bn QoQ).
• Deposits up $89Bn, while loans declined $25Bn QoQ.

Asset Quality and Provision for Losses:

• “Government stimulus and support has helped customers get through this pandemic. That support, coupled with our customer assistance programs and years of underwriting discipline under responsible growth, has resulted in low net charge-offs. Net charge-offs this quarter were $823 million.” — Paul M. Donofrio, CFO
• Improvement in macroeconomic outlook, and lower loan balances resulted in a $2.7 billion release of credit reserves.
• Consumer reserve release: $1.4 billion, driven primarily by cards.
• Commercial release was $1.2 billion.
• “Our allowance as a percent of loans and leases ended the quarter at 1.8%, which still remained well above the 1.27% where we began 2020 following our day 1 adoption of CECL.”— Paul M. Donofrio, CFO

Consumer Banking:

• Income: $2.7Bn (vs. 2.6Bn Q4 2020)
• Strong quarter in terms of customer deposits and investment flows.
• Improvement in digital enrollment. 70% of households use some part of digital platform.
• Zelle consumer dollar volume up 72% YoY.
• Zelle small business dollar volume up 182% YoY.
• 90% of business-to-consumer payments in Global Banking are made via Zelle.

Wealth Managment:

• Net Income: $881MM (+6% QoQ).
• Record AUM fees and near-record AUM flows.
• Client balances rose to record $3.5Tn, up $822Bn YoY.
• Added 6,000 net net households in Merrill Lynch and 700 new new relationships in Private Bank.
• 80% of Merill households are digitally active, with Q1 showing a record number of log-ins.

Global Banking:

• Net Income: $2.2Bn.
• +500MM vs. Q4, driven by provision benefit and solid revenues.

Global Markets:

• Net Income: $2.1Bn, up 39% YoY.
• Revenue up 26% YoY on higher sales and trading and equity underwriting fees.
• Expense increase was driven by volume-related expenses in both card and trading, and an acceleration in expense from changes in incentive awards.

Economy:

• “Based upon our Q1 weighting of those scenarios, GDP is forecasted to return to its 4Q ’19 level by the end of 2021.” — Paul M. Donofrio, CFO
• “The weighted scenario also assumes that the unemployment rate at the end of 2021 will be just north of 6%, which is in line with March unemployment rate. For 2022, the weighted average scenario assumed unemployment just under 5.5% as we exit the year.” — Paul M. Donofrio, CFO

Full Transcript: Fincredible Earnings