Key insights
- Bank of America's Q1 profit rose due to increased trading and investment banking activity driven by market volatility and a rebound in M&A. A hawkish Fed, AI bubble fears, and Middle East tensions fueled market rotation from tech to value. Strong dealmaking, particularly in technology, boosted BofA's advisory roles. This suggests a moderately positive outlook for US equities, reflecting resilience in financial services despite macro headwinds.
April 15 (Reuters) - Bank of America's profit rose in the first quarter, as volatility in the global markets lifted trading activity and a rebound in mergers and acquisitions boosted the lender's investment banking fees.
Shares of the company rose 1.5% in trading before the bell.
Global equity markets entered 2026 on a bullish trajectory, buoyed by year-end momentum from interest rate cuts worldwide in late 2025 and robust corporate earnings.
However, that optimism soon evaporated, as a hawkish policy shift from the Federal Reserve, mounting fears of an artificial intelligence valuation bubble, and escalating U.S. involvement in Middle East tensions pressured markets.
The volatility sparked an intensified market rotation, with investors fleeing high-growth tech shares in favor of defensive value sectors.
Volatile markets tend to benefit investment banks, as trading desks generate higher revenue from increased client activity. Bank of America's sales and trading revenue rose 13% to $6.4 billion in the first quarter.
DEALMAKING HELPS PROFIT BOOST
Global megadeals remained on a strong footing in the first three months of 2026, despite turbulence in the Middle East and swings in company valuations, with transactions in the first quarter exceeding $1.2 trillion.
Big transactions – specifically big technology M&A – dominated, with 22 deals worth more than $10 billion each signed in the three months ended March 31, a quarterly record, data compiled by LSEG showed.
BofA Securities secured key advisory roles on several of the quarter's largest mandates, including McCormick's $42.7 billion acquisition of Unilever's food business and Boston Scientific's $14.9 billion purchase of medical device maker Penumbra.
The bank also advised on Devon Energy's $26 billion takeover of Coterra Energy, a deal seen as a milestone in the consolidation of the U.S. shale sector.
The bank also led the consortium advising senior housing REIT Janus Living on its New York Stock Exchange listing in March.
BofA's total corporation investment banking fees rose 21% to $1.8 billion in the first quarter. The bank had expected a 10% rise.
JPMorgan Chase reported its first-quarter profit on Tuesday that beat analysts' estimates, also helped by a strong show in trading and dealmaking.
JPMorgan, Bank of America and Wells Fargo are all trading in red so far in 2026, underperforming the broader S&P 500 index, which was up about 1.8% as of last close.
Bank of America reported a net income of $8.6 billion, or $1.11 per share, in the three months ended March 31, compared with $7.4 billion, or 89 cents per share, a year earlier.
"We remain watchful of evolving risks. However, we saw healthy client activity, including solid consumer spending and stable asset quality, indicating a resilient American economy," CEO Brian Moynihan said in a statement.
(Reporting by Pritam Biswas in Bengaluru and Saeed Azhar in New York; Editing by Shinjini Ganguli)