Bank of America's 4th-quarter profit beats expectations, but revenue drops 10% as low interest rates hurt its consumer banking divisionJanuary 23, 2021
- Bank of America posted fourth-quarter profits of $5.5 billion, beating analyst expectations.
- Revenue dropped 10% to $20.1 billion, hurt by low interest rates and declining credit card activity.
- The bank’s shares rose 1% in pre-market trading after its $2.9 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 $5.5 billion in the quarter, or $0.59 per share, but still beat the $0.55 consensus estimates of analysts polled by Refinitiv.
Meanwhile, revenue dropped 10% to $20.1 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 $13.9 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: $0.59 versus $0.55 estimated
- Revenue: $20.1 billion versus $20.7 billion estimated
Bank of America’s shares climbed 1% to $33.35 in pre-market trading on Tuesday.
The firm said it released reserves of $828 million and provision for credit losses in the final quarter dropped to $53 million – indicating confidence in economic recovery. For the previous three quarters, it had booked $11.3 billion worth of provisions.
The bank also authorized the repurchase of $2.9 billion worth of stock through March 31 and announced a quarterly dividend of $0.18. The firm said it has $36 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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