Thursday March 23, 2023



Bank of America Reports Earnings

Bank of America Corporation (BAC) released its first quarter earnings report on Monday, April 18. The company's stock rose 3.4% following the earnings release.

Revenue came in at $23.3 billion during the first quarter, up 2% from $22.8 billion at this time last year. This was consistent with analysts' expectations of $23.2 billion for the quarter.

"First-quarter results were strong despite challenging markets and volatility, which we believe reflect the value of our `Responsible Growth' strategy," said Bank of America's CFO, Alastair Borthwick. "Asset quality continued to remain strong with net charge-offs about half of the year-ago quarter amount."

The company reported net income of $7.1 billion for the quarter or $0.80 per diluted share, down from $8.1 billion or $0.86 per diluted share in the same quarter last year.

Bank of America's Consumer Banking segment brought in net income of $2.9 billion during the quarter. In addition, the company's average loans grew by $70 billion and deposits by $240 billion year-over-year. The digital usage segment also noted a 5% increase, with 74% digitally active clients across commercial, corporate and business banking clients as of February 2022.

Bank of America Corporation (BAC) shares ended the week at $37.56, relatively unchanged for the week.

Rite Aid Posts Earnings

Rite Aid Corporation (RAD) released its fourth quarter and full year earnings report on Thursday, April 14. The drugstore chain reported increased revenue and sales.

Rite Aid reported quarterly revenue of $6.06 billion. This is up 2.5% from last year's fourth quarter revenue of $5.91 billion, and is above the $5.94 billion that analysts predicted. Revenue for the full year reached $24.6 billion.

"We exceeded our 2022 plan amid continuing challenges of the COVID-19 pandemic. As we look forward to the year ahead, we are ready and energized to compete in a new post-pandemic normal," said Rite Aid President and CEO, Heyward Donigan. "We demonstrated the important role that pharmacists play in the everyday health of our customers and are well positioned to grow in a trillion-dollar pharmacy market through our continued leadership as a full-service pharmacy company."

The company announced a net income loss of $389.1 million for the quarter, an increase compared to net loss of $18.5 million one year ago. On an adjusted earnings per share basis, the company posted net loss per share of $7.18, compared to $0.34 per share during the same quarter the previous year.

Rite Aid's retail pharmacy segment revenue from continuing operations increased 7.8% over the prior year's quarter to $4.4 million, which was driven by an increase in same store sales. The company attributes the increase to its prescription sales, which account for 70.1% of total drug-store sales. In addition to the benefit from 3.3 million COVID-19 vaccinations, maintenance prescriptions increased 1.0% for the quarter while other acute prescriptions increased 9.0% on a same store basis. The retailer also announced its recent partnership with Beyond Meat, which will now carry the product at approximately 2000 stores nationwide.

Rite Aid Corporation (RAD) shares ended the week at $7.42, up 2.8% for the week.

Wells Fargo Quarterly Report

Wells Fargo & Co. (WFC) released its first quarter earnings report on Thursday, April 14. The San Francisco-based company's stock fell 4.5% on Thursday following the release.

Wells Fargo announced revenue of $17.59 billion for the first quarter. This was down from $18.53 billion reported in the same quarter last year and fell below analysts' expectations of $17.80 billion.

"Our results in the first quarter reflected the continued economic recovery and the progress we've made on our strategic priorities. We had broad-based loan growth, growing both consumer and commercial loans from the fourth quarter" said Wells Fargo's Chief Executive Officer, Charlie Scharf. "Credit quality remained strong and our results included a $1.1 billion pre-tax reduction in the allowance for credit losses. We continued to return capital to our shareholders, including repurchasing $6 billion of common stock and increasing our quarterly common stock dividend to 25 cents per share."

The company reported earnings of $3.67 billion or $0.88 per share for the quarter. This was well below earnings of $4.63 billion or $1.02 per share reported last year at this time.

Wells Fargo's slowing mortgage demand affected its earnings as the Federal Reserve increased interest rates to fight inflation. The bank's first quarter earnings were aided by a decrease of $1.1 billion in allowances for credit losses, adding $0.21 cents of profit per share. The institution has also released funds set aside for potential losses due to reduced uncertainty around the economic impact of COVID-19 on the bank's loan portfolios. Additionally, Wells Fargo's net interest income increased 5% to $9.2 billion for the quarter, with average loans totaling $898 billion, up 3% from this time last year.

Wells Fargo & Co. (WFC) shares ended at $46.34, relatively unchanged for the week.

The Dow started the week at 34,411 and closed at 33,811. The S&P 500 started the week at 4,386 and ended at 4,272. The NASDAQ started the week at 13,319 and finished at 12,839.

Treasury Yields Rise

U.S. Treasury yields rose throughout the week due to concerns around inflation and the potential effect of tighter Federal Reserve policies, with the 10-year hitting its highest point since 2018. Yields continued to increase on Thursday as unemployment numbers returned higher than expected.

On Thursday, Federal Chairman Jerome Powell announced that the central bank is committed to raising rates as fast as possible in order to bring inflation down. This insinuates an interest rate increase of 50 basis points in May as prices rise at their fastest pace in more than 40 years.

"Our goal is to use our tools to get demand and supply back in synch, so that inflation moves down and does so without a slowdown that amounts to a recession," said Federal Chair, Jerome Powell. "I don't think you'll hear anyone at the Fed say that that's going to be straightforward or easy. It's going to be very challenging. We're going to do our best to accomplish that."

The benchmark 10-year Treasury note yield opened the week of 4/18 at 2.830% and traded as high as 2.956% on Thursday. The 30-year Treasury bond yield opened the week at 2.920 % and traded as high as 2.988% on Thursday.

On Thursday, the U.S. Department of Labor reported that initial claims for unemployment rose to 184,000 for the week. This was 2,000 less than the previous week's revised claims of 186,000 and above market estimates of 182,000 but marks their lowest level since Feb. 21, 1970.

"Economic growth may eventually hit a wall without more workers for companies to hire, but not today," said Chief Economist at FWDBONDS, Christopher Rupkey. "Jobless claims at near-record lows mean worker wages will continue to go up and up, guaranteeing that inflation remains more persistent and at more worrisome levels for longer than Fed officials believe."

The 10-year Treasury note yield closed at 2.197% on 4/22, while the 30-year Treasury bond yield was 2.938%.

Mortgage Rates Exceed 5%

Freddie Mac released its latest Primary Mortgage Market Survey on Thursday, April 21. The mortgage rates saw an increase this week, reaching their highest level in more than a decade as the Federal Reserve's policies continue to rein in high inflation in upcoming months.

This week, the 30-year fixed rate mortgage averaged 5.11%, up from last week's average of 5.00%. Last year at this time, the 30-year fixed rate mortgage averaged 2.97%.

The 15-year fixed rate mortgage averaged 4.38% this week, up from 4.17% last week. During the same week last year, the 15-year fixed rate mortgage averaged 2.29%.

"Mortgage rates increased for the seventh consecutive week, as Treasury yields continued to rise," said Freddie Mac's Chief Economist, Sam Khater. "While springtime is typically the busiest homebuying season, the upswing in rates has caused some volatility in demand. It continues to be a seller's market, but buyers who remain interested in purchasing a home may find that competition has moderately softened."

Based on published national averages, the savings rate was 0.06% as of 3/21. The one-year CD averaged 0.15%.

Published April 22, 2022

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