Adds graphic, analyst quote on paragraph 20, updates share price

By Saeed Azhar and Pritam Biswas

NEW YORK, April 15 (Reuters) - Bank of America BAC.N beat estimates for first-quarter profit, as heightened market volatility pushed revenue from equities trading to a record and a rebound in mergers and acquisitions boosted investment banking fees.

Shares of the company rose 1.6% in early trade on Wednesday.

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, but the optimism soon evaporated.

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 rattled the 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, helped by record equities trading volumes.

"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, adding that "we remain watchful of evolving risks."

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. Transactions in the first quarter exceeded $1.2 trillion, data compiled by LSEG showed.

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, the data showed.

"We continue to gain market share, and we feel good about our pipeline," CFO Alastair Borthwick said on a media call.

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.

It also led the consortium advising senior housing REIT Janus Living JAN.N on its New York Stock Exchange listing in March.

BofA's total investment banking fees rose 21% to $1.8 billion in the first quarter. The bank had expected a 10% rise.

JPMorgan Chase JPM.N reported its first-quarter profit on Tuesday that beat analysts' estimates, also helped by a strong show in trading and dealmaking.

Wells Fargo WFC.N, JPMorgan and Bank of America are all trading in the red so far in 2026, underperforming the broader S&P 500 index .SPX, which was up about 1.8% as of last close.

Bank of America's net profit rose nearly 17% to $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.

Analysts were expecting a per-share profit of $1.01, according to estimates compiled by LSEG.

"While management noted that they are mindful of the evolving risks, they have good capital & liquidity levels and see healthy client activity, solid consumer spending (debit & credit up 7%) and stable asset quality," said an analysts' note led by Glenn Schorr at Evercore.

INTEREST INCOME RESILIENT

Bank of America's net interest income — the difference between what the bank earns on loans and pays out on deposits — rose 9% to $15.7 billion from a year earlier.

Earnings from big lenders such as JPMorgan Chase and Bank of America typically shed light on the health of the U.S. economy, reflecting shifts in consumer spending, borrowing and business activity.

U.S. banks have benefited from the repricing of ‌fixed-rate assets ⁠and securities portfolios over time into higher-yielding assets.

The rate cuts announced in the second half of 2025 by the Federal Reserve helped banks reduce deposit costs and boost demand for loans, which led to relatively stable borrowing in the quarter, even amid macroeconomic pressures.

PRIVATE CREDIT EXPOSURE

Bank of America said that private credit portfolio finance loans were about $20 billion.

"We haven't seen any losses in this portfolio," CFO Borthwick said. "We're obviously watching and paying attention to the environment."

JPMorgan, Wells Fargo and Citigroup collectively disclosed about $108 billion in financing exposure to private credit or related loans during the quarterly earnings on Tuesday, but said they were comfortable with the exposure.

Private credit has become a key financing source for corporate America as tighter post‑crisis lending standards pushed borrowers to seek capital outside traditional banks.

Bank of America has earmarked $25 billion for private credit deals as it prepares a "war chest" to challenge non-bank lenders in one of the most lucrative areas of shadow banking.

The commitment, announced earlier this year, comes as the $1.8 trillion private credit market faces increased scrutiny. Alternative asset managers have seen their shares come under pressure in early 2026, due to fears of credit stress, fund outflows, and the vulnerability of technology-heavy portfolios to artificial intelligence-driven disruption.