By Noor Zainab Hussain and Elizabeth Dilts Marshall
(Reuters) -Bank of America Corp's profit more than doubled in the first quarter and topped Wall Street estimates as it released reserves it had set aside to cover potential coronavirus loan losses.
The second-largest U.S. bank by assets unlocked $2.7 billion from its reserves and unveiled a $25 billion stock repurchase plan, betting on a swift economic recovery driven by rapid vaccinations.
Consumer banking revenue at the bank, however, fell 12% to $8.1 billion in the quarter ended March. Net interest income, a key measure of how much the bank can make from lending, fell 16% to $10.2 billion in the quarter.
"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," Brian Moynihan, the bank's chairman and chief executive, said in a statement.
The Federal Reserve last year brought in ultra-low interest rates to allow for a more rapid recovery from the pandemic-induced recession. However, such low rates eat into the income of lenders like Bank of America, which make profit from the difference between what they earn on loans and pay out on deposits.
Like JPMorgan Chase & Co, which reported earnings earlier in the week, loans and lease balances fell across the bank's divisions by 7% to $887 billion, driven mostly by lower credit card balances and declines in commercial loans.
Bank of America executives said in January they were optimistic the bank could return to loan growth this year. Appetite for new loans waned during the pandemic as customers spent less and saved more and large companies relied on capital markets for funds rather than their bank.
Net income applicable to common shareholders rose to $7.56 billion, or 86 cents per share, from $3.54 billion, or 40 cents per share, a year earlier.
Analysts on average had expected a profit of 66 cents per share, according to IBES data from Refinitiv.
Pre-tax, pre-provision profit, seen this quarter as a better gauge of lenders' true performance, was down 21% from a year earlier. By comparison, JPMorgan said on Wednesday its first quarter pre-provision profit was up 18%, while Wells Fargo & Co reported at 13% drop.
(Reporting by Noor Zainab Hussain in Bengaluru and Elizabeth Dilts Marshall in New York; Editing by Saumyadeb Chakrabarty)