Bank of America posts higher than expected quarterly profit
Underscoring its confidence in the US economy, the bank releases $800m set aside to cover coronavirus-driven loan losses
Bengaluru — Bank of America posted a drop in fourth-quarter profit on Tuesday that still topped Wall Street expectations and pointed to signs of an economic recovery as the pace of consumer spending gathers steam.
Underscoring its confidence in the economy, the bank joined peers JPMorgan Chase and Citigroup in releasing some of the cash it had set aside to cover coronavirus-driven loan losses. It released $800m.
“In the fourth quarter, we continued to see signs of a recovery, led by increased consumer spending, stabilising loan demand by our commercial customers, and strong markets and investing activity,” CEO Brian Moynihan said.
Progress on Covid-19 vaccines and billions of dollars in stimulus position the bank well as economic recovery continues, Moynihan said.
The second-largest US bank by assets, however, reported a 13% fall in consumer banking revenue to $8.2bn, citing a hit from lower interest rates.
Lower rates have limited how much banks can charge for their lending services at the same time fiscal stimulus programmes and flagging consumer confidence have softened loan demand.
Net interest income at the bank, a key measure of how much it can make from lending, tumbled 16%. The bank reported a 10% fall in overall revenue, net of interest expense, to $20.1bn.
The lender relies on higher interest rates to drive its profit growth as it has a large pool of deposits and rate-sensitive mortgage securities.
Net income applicable to common shareholders fell to $5.21bn, or 59c per share, for the quarter ended December 31 from $6.75bn, or 74c per share, a year earlier.
Analysts on average had expected a profit of 55c per share, according to the IBES estimate from Refinitiv, helped by lower credit costs.
The bank released $828m from its credit reserves for bad loans after adding more than $8bn through the first three quarters of the year.
Its sales and trading business was a bright spot, with revenue rising to $3bn from $2.8bn a year earlier, mirroring that of peers JPMorgan Chase and Citigroup.
Wall Street banks have seen a surge in trading revenue in 2020 as they benefited from volatility in financial markets.
Net income for Bank of America's global markets unit jumped 38% to $791m.
Separately, the second-largest US bank said its board approved a $3.2bn share repurchase programme in the first quarter after getting a green light from regulators to resume buybacks last month.
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