Bank of America Earnings Slip -- 2nd Update
16 January 2020 - 3:31AM
Dow Jones News
By Ben Eisen
Bank of America Corp. said fourth-quarter profit fell 4% as the
bank struggled to adjust to falling interest rates.
The second-largest U.S. bank by assets said Wednesday it earned
$6.99 billion in the quarter, down from $7.28 billion a year
earlier.
The bank had revenue of $22.35 billion, down about 1% from
$22.68 billion. Still, that beat the $22.22 billion expected by
analysts polled by FactSet.
The drop in profit and revenue reflect how banks must
accommodate after enjoying a short-lived period of higher interest
rates that boosted their lending margins. The Federal Reserve has
cut rates three times in recent months, though banks have largely
made a smooth transition because of a relatively strong U.S.
economy.
"Our results continue to reflect the strength of the U.S.
consumer in the biggest economy in the world," Chief Executive
Officer Brian Moynihan said on a call with analysts.
Still, the results were a contrast to JPMorgan Chase & Co.
and Citigroup Inc. Both reported big jumps in fourth-quarter profit
and revenue on Tuesday, boosted in part by strong consumer
operations and credit-card spending.
Bank of America's consumer bank reported lower profit and
revenue. Shares were about 1.9% lower in morning trading, while the
broader market was up slightly.
Bank of America beat expectations for per-share earnings, though
that was partly because it ramped up share repurchases last year.
The bank pulled some 9% of its stock out of the market, which
helped push up fourth-quarter per-share results to 74 cents from 70
cents a year earlier. That was more than the 68 cents analysts
predicted.
The Charlotte, N.C.-based lender particularly benefited from the
Federal Reserve's decision to lift rates nine times between late
2015 and late 2018, because the bank has a large U.S. customer
base. It was able to charge borrowers more interest without having
to significantly increase payouts to depositors.
Net interest income, the amount banks make from lending minus
what they pay out on deposits, fell 3% in the fourth quarter from
the year-ago period. Net interest margin, which measures lending
profitability, was 2.35%, down from 2.52% a year ago.
Lower rates have forced banks to put a greater focus on the
fee-generating businesses included in noninterest income. Bank of
America reported an increase of 0.4% in noninterest income.
JPMorgan and Citigroup boosted revenue from nonlending operations
by more than 20% in the quarter.
Still, lower rates aren't all bad news for banks. They boosted
appetite for borrowing across the industry and allowed Bank of
America and others to lower what they pay on deposits.
Total loans and leases rose 4% from the year earlier. The bank
said that demand for mortgages help propel growth in consumer
loans. It made $22.11 billion in mortgages, more than double the
year-earlier period.
Deposits rose 4% from a year ago to $1.43 trillion, as the
largest U.S. banks continue to scoop up market share. The bank
increased deposits even though it lowered what it paid on many of
them. Bank of America paid 0.58% on U.S. interest-bearing deposits
in the fourth quarter, down from 0.63% a year earlier.
Mr. Moynihan said the bank is also seeing more optimism among
its commercial clients as economic uncertainty recedes and the
trade war between the U.S. and China cools.
"We see some resolution of those issues, and that combined with
the continued consumer strength leads us to expect to see
businesses continue their solid activity," Mr. Moynihan said.
Expenses rose about 1% to $13.24 billion.
Like its peers, Bank of America was helped by a rebound in
trading, which was hit hard by a dismal year-ago period. Trading
revenue rose 7% from a year earlier, led by a rebound in the
fixed-income division.
Investment banking fees rose about 9% from a year earlier as the
bank underwrote more debt and equity.
Write to Ben Eisen at ben.eisen@wsj.com
(END) Dow Jones Newswires
January 15, 2020 11:16 ET (16:16 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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