April 16th, 2024 – Today, Bank of America (BAC) released an important statement in which it disclosed its disappointing Q1 2024 profits, which marked a decrease of around 18% compared to their 2023 Q1. The factor that determined this very poor performance was the huge difference between the deposits’ costs and the combination of assets’ yields and loans’ growth, with the interest paid on deposits exceeding BoA’s earnings. At the same time, other US financial giants like JP Morgan Chase, Wells Fargo and Citigroup reported negative results because of the same trend experienced by BoA. To have a clearer idea of how bad the situation is for Bank of America, it is sufficient to look at the increase in the interest rate paid on US interest-bearing deposits, which rose from 1.28% in Q1 2023 to 2.53% in Q1 2024. In this complex situation, Bank of America hopes FED will lower the number of interest rates’ cuts expected to be introduced (currently, the US central bank opts for 3 of them), considering that higher interest rates would allow BoA to force its debtors to pay more for the loans.
Goldman Sachs’ (GS) growth equity division decided to expand its operations through an investment of $47.5 million into the innovative polish startup Kontakt.io. This company was able to grow exponentially in recent times without relying too much on external sources of financing and its main market is the health care sector for sure, taking into account that it represents 80% of the total sales of Kontakt.io, which is interested in introducing AI innovations capable of helping hospitals’ management teams to take better and faster decisions about patients, beds and equipments. The idea is to introduce an AI system through which keeping track of everything that happens inside hospitals, so as to have the possibility of improving the way in which decisions related to capacity and replacement are taken thanks to suggestions provided by the system itself.
Portfolio Update: Last week, the Investment Strategy Team chose to purchase UAL. The purchase was made at $ 41.78, following a 3.9% pullback. We purchased one unit, using our cash position to finance our asset allocation.
Author: Piero Foberti