Bank of Amer­ica profit jumps 47%

San Francisco Chronicle Late Edition - - BUSINESS -

Bank of Amer­ica’s fourth-quar­ter profit jumped 47 per­cent from a year ago as the na­tion’s largest con­sumer bank ben­e­fited from higher in­ter­est rates and lower ex­penses.

The North Carolina bank said it earned a profit of $4.34 bil­lion (40 cen­ters per share) af­ter pay­ments to pre­ferred share­hold­ers, up from $2.95 bil­lion (27 cents) in the same pe­riod a year ear­lier. The re­sults topped the ex­pec­ta­tions of an­a­lysts, who were look­ing for 38 cents per share, ac­cord­ing to Fac­tSet.

In BofA’s con­sumer bank­ing divi­sion, the bank’s largest busi­ness by profit and rev­enue, had net in­come of $1.92 bil­lion in the quar­ter, com­pared with $1.74 bil­lion in the same pe­riod a year ear­lier. The busi­ness had been helped by higher in­ter­est rates, as net in­ter­est in­come rose from $5.23 bil­lion to $5.47 bil­lion year over year.

Like many con­sumer banks, BofA had strug­gled to in­crease its profit for the last sev­eral years be­cause of record low in­ter­est rates. Now that the Fed­eral Re­serve has started in­creas­ing rates, the bank can charge more for loans.

The Fed’s most re­cent in­ter­est rate hike, in mid-De­cem­ber, is ex­pected to ben­e­fit Bank of Amer­ica and other banks this year.

“While the re­cent rise in in­ter­est rates came too late to im­pact fourthquar­ter re­sults, we ex­pect to see a sig­nif­i­cant in­crease in net in­ter­est in­come in the first quar­ter of 2017,” Paul Donofrio, BofA’s chief fi­nan­cial of­fi­cer, said in a state­ment.

The bank also ben­e­fited from the im­prov­ing health of the na­tion’s con­sumer and busi­nesses. The bank set aside less money for bad loans, and the per­cent­age of loans con­sid­ered to be un­re­cov­er­able fell to 0.39 per­cent from 0.52 per­cent a year ear­lier.

BofA’s global mar­kets divi­sion also ben­e­fited in the quar­ter, fol­low­ing the stock mar­ket rally af­ter the pres­i­den­tial elec­tion. Global mar­kets had net in­come of $658 mil­lion, com­pared with $171 mil­lion in the same pe­riod a year ear­lier.

The bank posted ad­justed rev­enue of $19.99 bil­lion, which missed Street fore­casts. An­a­lysts ex­pected $20.62 bil­lion.

For 2016, BofA had a profit of $16.22 bil­lion ($1.50 per share), com­pared with $14.35 bil­lion ($1.31) a year ear­lier. Rev­enue was $83.70 bil­lion, up mod­estly from $82.97 bil­lion the pre­vi­ous year.

“We ex­pect ... a sig­nif­i­cant in­crease in net in­ter­est in­come in the first quar­ter.” Paul Donofrio, chief fi­nan­cial of­fi­cer

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