BofA revenue misses estimates as bond trading ebbs at year-end

BANK OF America Corp. posted fourth-quarter revenue that missed analysts’ estimates as a 12 percent increase in bond trading fell short of predictions. / BLOOMBERG NEWS PHOTO
BANK OF America Corp. posted fourth-quarter revenue that missed analysts’ estimates as a 12 percent increase in bond trading fell short of predictions. / BLOOMBERG NEWS PHOTO

NEW YORK – Bank of America Corp. posted fourth-quarter revenue that missed analysts’ estimates as a 12 percent increase in bond trading fell short of predictions. Profit surged as CEO Brian Moynihan cut expenses.

“Things tapered off at the end of the year,” Chief Financial Officer Paul Donofrio said Friday in a conference call with journalists. Fixed-income trading “did very well in the first two months of the quarter,” he said.

Moynihan, 57, has been cutting costs for years while contending with persistently low interest rates. That’s starting to pay off as Wall Street firms benefit from a rebound in fixed-income trading and the company moves beyond epic legal claims over mortgages that soured in the financial crisis. Last year, the bank set a target of $53 billion in annual expenses by the end of 2018, or about 8 percent less than 2015.

Fixed-income trading revenue climbed to $1.96 billion, short of analysts’ $2.1 billion average estimate, the Charlotte, North Carolina-based company said in a statement. Equity trading rose 11 percent to $948 million, in line with their predictions. Total revenue rose 2.1 percent to $20 billion, missing estimates of $20.8 billion. Expenses fell 6 percent, more than expected, to $13.2 billion as compensation costs dropped 2.6 percent.

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Net income rose to $4.7 billion, or 40 cents a share, from $3.28 billion, or 27 cents, a year earlier. That beat the 38-cent average estimate of 29 analysts surveyed by Bloomberg.

The lender revised earnings for recent years on Oct. 4 to reflect a change in the way it accounts for certain securities held in its investment portfolio. The move brings it in line with other Wall Street firms and may reduce swings in quarterly earnings, the bank said. The firm also dissolved a business segment created in 2011 to house delinquent mortgages.

Bank of America slid 0.7 percent to $22.76 in early trading at 7:35 a.m. in New York. The shares gained 35 percent since Nov. 8 through Thursday — the most among large U.S. lenders — as President-elect Donald Trump’s victory fueled investor expectations that financial firms would benefit from rising interest rates and relaxed regulation.

Interest income

Net interest income rose 6.3 percent to $10.3 billion, falling short of the $10.6 billion average estimate of 11 analysts surveyed by Bloomberg. Net interest margin, the difference between what a bank charges for loans and pays for deposits, was unchanged from three months earlier at 2.23 percent, and up from 2.14 percent a year earlier. The Federal Reserve’s quarter-point rate hike in December is expected to boost lending margins, with Bank of America among the most sensitive to interest-rate changes.

Investment-banking revenue, which includes deal-making and underwriting securities in the business run by Christian Meissner, slid 3.9 percent to $1.22 billion, the company said. That beat the $1.14 billion average estimate of seven analysts surveyed by Bloomberg. Last month, Moynihan said he expected those activities would generate $1 billion to $1.2 billion in the fourth quarter.

Consumer-banking profit rose 11 percent to $1.92 billion, while income from credit cards fell 1.8 percent to $1.29 billion from a year earlier.

Mortgage revenue almost doubled to $519 million from a year earlier, the bank said. Barclays PLC’s Jason Goldberg had expected the bank to generate $252 million from mortgage banking as fewer consumers take out residential loans, while Macquarie Group Ltd.’s David Konrad estimated $218 million.

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