Bank of America profit jumps 47%
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