Bank of America today reported a better-than-expected rise in quarterly profit, as a growing loan book and cost cuts made up for a drop in revenue in investment banking. 

The second-biggest US bank benefited from 3% growth in consumer loans and 4% growth in loans to businesses in the first quarter, allowing it to capture more revenue from higher U.S. interest rates. 

Revenue rose in two of the lender's four main businesses. 

The bank has benefited from the US Federal Reserve's four rate hikes in 2018, while a strong job market has also kept bad loans in check and borrowing healthy. 

Bank of America relies heavily on higher interest rates to maximise profits as it has a large deposit pool and rate-sensitive mortgage securities. 

Net interest income - the difference between what a lender earns on loans and pays on deposits - rose 5% to $12.38 billion. Average deposits also rose nearly 5% to $1.36 trillion. 

However, Bank of America's trading desks, like its peers, have had a slow start to the year due to the US government shutdown and a drop in volatility.

This compared with a year earlier when changes in the US tax code and trade war concerns spurred more trading.

The bank said its overall trading revenue declined 17%, with equities trading revenue falling 22% and fixed income trading revenue slipping 8%. 

" It was a challenging capital markets environment," chief executive Officer Brian Moynihan said in a statement. 

The bank said its net income applicable to common shareholders rose 6% to $6.87 billion. 

Excluding one-time items, the bank earned 71 cents per share, beating the 66 cents per share analysts on average had expected, according to IBES data from Refinitiv. 

Its revenue, net of interest expense, was flat at $23 billion and was below analysts' expectations of $23.30 billion. 

Non-interest expense also fell 4.5% to $13.2 billion.