Bank of America posted lower-than-expected fourth quarter revenue and earnings that barely met expectations despite an over $800 million bottom-line boost from releasing some of its reserve for loan losses.
In its report released Tuesday, the second-largest bank in the U.S. said revenue for the final three months of 2020 came in at $20.1 billion, 10% below the same period in 2019 and short of the $20.6 billion forecast by Wall Street analysts.
Fourth-quarter profit totaled $5.5 billion, down from $7 billion a year ago, and earnings were $0.59 per share, beating estimates of $0.55 per share.
Net interest income declined 16% to $10.3 billion, while consumer banking revenue fell 13% to $8.2 billion and wealth management revenue slipped 5% to $4.7 billion. Bank of America also reported a 5% drop in fixed income trading revenue to $1.7 billion, though equity trading revenue rose 30% to $1.3 billion.
The bank released $828 million from its reserve, resulting in a $53 million charge for credit losses after recording $11.3 billion in provisions in the first three quarters. Bank of America said it would maintain its $0.18 per share quarterly dividend.
Last week, rivals JPMorgan Chase and Citigroup posted profits that beat expectations and said they were releasing a combined $4.4 billion from loan-loss reserves, reflecting an improving economic outlook.
Although the COVID-19 pandemic has caused record unemployment and left many households and businesses struggling to make ends meet, consumers overall have continued to spend.
In a statement accompanying the fourth-quarter report, Bank of American Chief Executive Officer and Chairman Brian Moynihan said, “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.”
“The latest stimulus package, continued progress on vaccines and our talented teammates – who performed well helping their customers through this crisis – position us well as the recovery continues,” he said.
Bank of America also announced a plan to buy back $2.9 billion in shares during the first quarter of 2021, in addition to $300 million to offset stock given to its employees.
Chief Financial Officer Paul Donofrio said, “Despite one of the worst economic environments in modern memory, we ended the year stronger than before the health crisis and well positioned to support our clients.”
“We grew deposits by $361 billion, improved our capital ratios and increased liquidity to record levels, exceeding loans. Because of the responsible way we have operated the company over many years, we were able to support the economy by raising $772 billion in capital on behalf of clients, invest in our franchise and still be in a position to return $4.8 billion in capital to our shareholders in the first quarter of 2021 in the form of common stock repurchases and dividends,” he said.
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Source: Equities News
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