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The string of solid quarterly results from the banking industry continued with Bank of America (BAC) beating 1Q25 EPS and revenue expectations, displaying its resiliency and the benefits of its diversified business model. Encouragingly, BAC's net interest income (NII) increased by 3% to $14.6 bln (Full Tax Equivalent), meeting the company's guidance and enabling it to maintain its 4Q25 NII forecast of $15.5-$15.7 bln. Higher interest rates and modest loan growth are supporting NII growth, while strong capital inflows into BAC's Wealth and Management segment are helping to provide stability in a choppy and increasingly volatile environment.

However, the effects of persistently high interest rates, inflation, and macroeconomic uncertainty are rearing their head, especially among BAC's lower-income borrowers. This is illustrated by BAC's net charge-offs, which increased by $118 mln yr/yr to $1.3 bln in the Consumer Banking segment, continuing a trend of rising charge-offs and signaling some deterioration in credit quality. 

• Staying in the Consumer Banking segment, credit/debit card spend remained healthy, growing by 4% to $228.0 bln, down a tick from last quarter's 5% increase. Still, net income for the segment fell by about 5% yr/yr to $2.5 bln as provision for credit losses increased by 12% to $1.3 bln. Higher provision for credit losses indicates that the bank is setting aside more funds to cover potential loan defaults. While net charge-offs remain manageable and within historical norms, they have increased from $800 mln in 2Q24, to $1.0 bln in 3Q24, and then to $1.1 bln last quarter and $1.3 bln in 1Q25.
• Similar to Morgan Stanley (MS), BAC's Wealth and Investment Management business was a standout in Q1 as client balances grew by 5% to $4.2 trillion, driven by positive net client flows and higher market valuations. Since 1Q24, the company has seen positive AUM flows of $79.0 bln, facilitating increased asset management fees and revenue. In Q1, the segment generated revenue growth of 5% to $6.02 bln, while net income was flat yr/yr at $1.0 bln.
• Following earnings reports from MS, Goldman Sachs (GS), and JPMorgan Chase (JPM), a downturn in BAC's Global Banking segment was fully anticipated. Indeed, the segment experienced a slowdown as revenue came in flat yr/yr at $6.0 bln with investment banking fees dropping by 3% to $1.5 bln. Declines in equity underwriting fees amid a softening IPO market are weighing on BAC and the investment banking industry as a whole.
• Also like MS, BAC achieved record equities trading revenue in Q1 due to heightened market volatility tied to the global trade war. Equity revenue jumped by 17% to $2.2 bln, outperforming the 8% increase in FICC trading revenue to $3.5 bln. On the FICC side, trading activity for commodities and credit products remained healthy.

BAC delivered solid Q1 results with EPS growing by 18% yr/yr, driven by robust NII of $14.6 bln and another strong performance in the Wealth and Investment Management unit. However, net charge-offs continue to creep higher, raising some concern about credit quality and highlighting potential risks in BAC's bread-and-butter Consumer Banking segment as economic pressures mount.