Shares of Bank of America (BAC -0.65%) traded more than 4% higher as of 2:10 p.m. ET today after it reported solid earnings results for the first quarter of 2022.
Bank of America reported earnings per share of $0.80 in the quarter on revenue of $23.2 billion. Both numbers beat analyst estimates for the quarter.
Notably, the bank reported that average loan balances were up 3.5% from the previous quarter, driven largely by growth in commercial lending. Furthermore, it reported that credit quality remained strong, despite all of the economic uncertainty ahead.
On the earnings call, CEO Brian Moynihan said that "our economists do not have a recession predicted in terms of this year, it's around 3% growth, next year, a little over 2%," referring to economic growth.
The bank also provided a strong outlook for net interest income (NII), one of the bank's main sources of revenue, which is the profits banks make on loans, securities, and cash after covering the cost of funding those assets.
CFO Alastair Borthwick said that if loan growth materializes and the Federal Reserve hikes its benchmark overnight lending rate, the federal funds rate, as it is projected to this year, the bank will realize an increase of more than $650 million of NII in the second quarter than from the $11.6 billion it generated in the first quarter. Then NII is supposed to accelerate from there in the final two quarters of the year. Management also confirmed its prior guidance that it expects to hold full-year expenses roughly flat from 2021 levels.
Obviously, there is a lot of uncertainty in the air, with investors worried about inflation, a potential recession, and Russia's ongoing invasion of Ukraine.
But given the strong credit quality at Bank of America, the potential for massive NII growth this year, and the reaffirming of expense guidance, I would definitely recommend buying the stock, especially considering the pullback this year.