Bank of America 4Q earnings beat Wall Street's profit forecasts as sales and trading revenue jumps

Shutterstock/Tero Vesalainen

  • Bank of America Merrill Lynch’s fourth-quarter earnings beat Wall Street’s profit forecasts but missed on revenue as lower interest rates weighed on several of its divisions.
  • Revenue and net income fell across the consumer banking, global wealth and investment management, and global banking divisions.
  • The global markets segment posted higher revenue and net income, fuelled by a 7% rise in sales and trading revenue.
  • The shares rose as much as 0.9% in premarket trading before paring their gains.
  • View Business Insider’s homepage for more stories.

Bank of America Merrill Lynch reported fourth-quarter earnings on Wednesday, besting the profit forecasts of analysts surveyed by Bloomberg, but falling slightly short of their revenue expectations.

The nation’s second-biggest lender after JPMorgan Chase revealed a 1.7% fall in revenue to $US22.3 billion, and a 4% drop in net income to $US7 billion. The decline stemmed from a 3% drop in net interest income, fuelled by lower interest rates.

Bank of America shares rose as much as 0.9% in premarket trading before paring their gains.

Here are the key numbers:

  • Net income: $US7.0 billion versus the $US6.31 billion estimate
  • Earnings per share: $US0.74 versus the $US0.69 estimate
  • Revenue: $US22.3 billion versus the $US22.4 billion estimate

“The company managed well through a period of transition from rising rates to lower rates over a short period of time,” finance chief Paul Donofrio said in the earnings release.

“Solid client activity in growing loans and gathering deposits helped us offset spread compression,” he added.

Bank of America’s consumer banking division recorded declines in both revenue and net income, as lower interest rates offset a 5% rise in deposits, a 7% rise in average loans, and a 6% increase in combined credit and debit spending helped by record holiday spending last year.

The global wealth and investment management posted a 2% drop in revenue and a 4% fall in net income as lower interest rates took a toll. In the global banking business, lower net interest income pushed revenue down 1%, helping to send net income down 8%.

The good news was in the bank’s global markets division. Revenue rose 6% as sales and trading revenue jumped 7%, driving a 13% increase in net income.

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.