Bank of America’s 4th-quarter profit beats expectations, but revenue drops 10% as low interest rates hurt its consumer banking division

Brian Moynihan, CEO of Bank of America. Bobby Yip/Reuters
  • Bank of America posted fourth-quarter profits of $US5.5 billion, beating analyst expectations.
  • Revenue dropped 10% to $US20.1 billion, hurt by low interest rates and declining credit card activity.
  • The bank’s shares rose 1% in pre-market trading after its $US2.9 billion stock buyback announcement.
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Bank of America posted fourth-quarter results on Tuesday that beat analyst expectations, but its revenue was hurt by historically low interest rates that affected its consumer banking business.

The second-biggest US lender posted a 28% drop in net income to $US5.5 billion in the quarter, or $US0.59 per share, but still beat the $US0.55 consensus estimates of analysts polled by Refinitiv.

Meanwhile, revenue dropped 10% to $US20.1 billion against a backdrop of low interest rates, higher brokerage service fees, and a fall in credit card activity. Non-interest expenses for the bank rose 5% to $US13.9 billion, the bank said, driven mainly by higher net COVID-19 costs.

Higher interest rates ordinarily help drive bank profits because of the business’s exposure to a large pool of rate-sensitive securities.

“In the fourth quarter, we continued to see signs of a recovery, led by increased consumer spending, stabilizing loan demand by our commercial customers, and strong markets and investing activity,” chairman and CEO Brian Moynihan said in a statement.

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Here are the key figures:

  • Earnings per share: $US0.59 versus $US0.55 estimated
  • Revenue: $US20.1 billion versus $US20.7 billion estimated

Bank of America’s shares climbed 1% to $US33.35 in pre-market trading on Tuesday.

The firm said it released reserves of $US828 million and provision for credit losses in the final quarter dropped to $US53 million — indicating confidence in economic recovery. For the previous three quarters, it had booked $US11.3 billion worth of provisions.

The bank also authorised the repurchase of $US2.9 billion worth of stock through March 31 and announced a quarterly dividend of $US0.18. The firm said it has $US36 billion more in capital than the minimum requirement.

JPMorgan last week reported a 42% rise in net income, helped by its corporate and investment banking division.

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