Brian Moynihan, CEO, Bank of America
Scott Mlyn | CNBC
Bank of America reported fourth-quarter results on Friday that showed higher rates of interest helped the Wall Street giant make up for a pointy slowdown in investment banking.
Listed here are the important thing metrics compared with what Wall Street expected:
- Earnings: 85 cents per share versus 77 cents a share, in keeping with Refinitiv
- Revenue: $24.66 billion versus $24.33 billion, in keeping with Refinitiv
The outcomes were boosted by sizeable gains in interest income due to higher rates and loan growth within the fourth quarter. The bank reported $14.7 billion of net interest income, up 29% 12 months over 12 months but barely below Wall Street expectations of $14.8 billion, in keeping with StreetAccount.
That gain helped offset a decline in investment banking fees, which fell greater than 50% to $1.1 billion. That result was largely according to expectations, in keeping with StreetAccount.
Nevertheless, the bank did guide for net interest income to say no sequentially in the primary quarter of 2023.
Shares of Bank of America rose 2.2% on Friday.
“The themes within the quarter have been consistent all 12 months as organic growth and rates helped deliver the worth of our deposit franchise. That coupled with expense management helped drive operating leverage for the sixth consecutive quarter,” CEO Brian Moynihan said in a press release.
Bank of America was imagined to be considered one of the fundamental beneficiaries of the Federal Reserve’s rate-boosting campaign. But bank stocks got hammered last 12 months amid concerns a recession was on the best way.
The bank implemented a $1.1 billion provision for credit losses, up $1.6 billion compared with the identical quarter in 2021, but said net charge-offs remain below pre-pandemic levels.
Notably, that was below the $2.3 billion provision for credit losses from rival JPMorgan Chase, but Moynihan said Bank of America is similarly expecting a gentle recession.
“Our baseline scenario contemplates a gentle recession. … But we also add to that a downside scenario, and what this leads to is 95% of our reserve methodology is weighted toward a recessionary environment in 2023,” Moynihan said on a call with investors.
On the buyer banking front, Bank of America reported that balances were roughly flat, while bank card and debit spending rose 5% 12 months over 12 months. Average outstanding balance on bank cards climbed by 14%.
Average loans and leases for the entire bank rose 10% 12 months over 12 months, while the identical metric for consumer banking rose 6%.
The worldwide wealth and investment management business saw total revenue increase marginally at the same time as average deposits declined. Net income for the segment was down 2% 12 months over 12 months.
Revenue from fixed income, currency and commodity trading was one other vibrant spot, rising 37% 12 months over 12 months.
Prior to the report, Bank of America’s stock was up 4% in the primary few days of 2023.