Bank of America beats 4th-quarter profit estimates on record investment banking fees

Brian Moynihan, Bank of America CEO.

Bank of America reported fourth-quarter earnings Wednesday that beat/missed Wall Street’s forecasts.
The lender’s profit rose 28% to $7.01 billion or $0.82 a share, beating analyst estimates of $0.75 a share.
Quarterly revenue came in at $22.1 billion, just under Bloomberg analyst estimates of $22.2 billion.
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Bank of America posted fourth-quarter results that beat analyst estimates for profit on record asset management and investment banking fees.

The second-biggest US lender reported $22.1 billion in managed revenue, just below Bloomberg consensus estimates of $22.2 billion. Fourth-quarter profit rose 28% to $7.01 billion, or 82 cents per share, beating analyst estimates of 75 cents a share.

“Our fourth-quarter results were driven by strong organic growth, record levels of digital engagement, and an improving economy,” CEO Brian Moynihan said in the earnings release. “We grew loans by $51 billion and added $100 billion of deposits during the quarter, further strengthening our position as the leader in retail deposits.” 

The bank said its strong numbers were a result of higher asset management and brokerage fees and the impact of strong loan and deposit growth.

Non-interest expenses rose 6% to $14.7 billion, the bank said, driven by higher revenue-related incentive compensation.

Here are the key numbers:

Revenue: $22.1 billion versus Bloomberg analyst expectations of $22.2 billion, and $20.1 billion a year ago
Earnings per share: 
$0.82 versus Bloomberg analyst expectations of $0.75, and $0.59 a year ago

Bank of America’s stock rose 2.3% in Wednesday’s pre-market session to $47.36 per share.

The bank said improved credit quality allowed it to release reserves of $851 million, and provision for credit losses improved to $489 million as a result of a recovery in the macroeconomic environment.

The consumer banking segment was the standout performer, raking in revenue of $8.9 billion. Bank of America said it added more than 900,000 new consumer accounts, a jump of 64% compared to 2019.

The lender has recently benefited from the prospects of higher interest rates – a Federal Reserve tool to temper inflation – which allows banks to start charging more for loans. But this narrative has been somewhat dented after banks began disclosing the impact of wage inflation on results.

Return on average common shareholders’ equity was at 12.23% in the fourth quarter, while return on average tangible common shareholders equity was 17.02%.

“We ended the year on a strong note,” CFO Alastair Borthwick said. “Revenue rose faster than expenses, producing our second straight quarter of year-over-year positive operating leverage.

JPMorgan beat Wall Street forecasts last week, while Goldman Sachs missed estimates for profit due to increased expenses.

Read More: Jonathan Edwards’ fund had its best year in the last 18 in 2021. Here’s how he claimed a spot atop Wall Street’s top 5, and 3 stocks he says are still cheap.

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