CHARLOTTE, N.C. (AP) – Bank of America Corp.’s fourth-quarter profits fell 18% from a year ago, as lower interest rates weighed down its results. However the bank was able to release more than $800 million from its credit reserves, a sign that it sees the United States economy improving in the coming months.
The North Carolina-based bank said Tuesday that it earned a profit of $5.47 billion, or 59 cents a share, down from a profit $6.99 billion, or 74 cents per share, in the same period a year earlier. Analysts were expecting BofA to earn 56 cents a share, according to Zacks Investment Research.
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Quarterly revenue totaled $20.1 billion, a decline from $22.3 billion one year prior.
“During 2020, we witnessed the dramatic effects of the health crisis on the economy and our company’s operations. 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,” said Bank of America Chairman and CEO Brian Moynihan. “The latest stimulus package, continued progress on vaccines, and our talented teammates – who performed well helping their customers through this crisis – position us well as the recovery continues.”
Deposits totaled $1.8 trillion an increase from $1.43 trillion one year prior.
Loans and leases totaled $927.9 billion, a decline from $983.4 billion one year prior.
Like its Wall Street competitors, Bank of America was able to release hundreds of millions of dollars from its loan-loss reserves – money the bank had set aside earlier in the pandemic to cover loans that might be now be unpayable. But as the economy has relatively improved, banks have been able to free up some of those reserves.
In the quarter, BofA released $828 million from its credit reserves. This type of release goes straight to a bank’s bottom line, but it’s largely because the money was moved out of an escrow-like account and was now free to be used again.
Low interest rates were the biggest drag on BofA’s results compared to last year. The Federal Reserve sharply cut rates once the pandemic hit. Bank of America’s balance sheet is heavily weighted toward short-term interest rates, so it was hit harder than the rest of its competitors. Interest revenue in the quarter went from $12.14 billion to $10.25 billion.
Noninterest income for the quarter totaled $9.8 billion, a decline from $10.2 billion one year prior. Noninterest expense totaled $13.9 billion, a rise from $13.2 billion in the fourth quarter of 2019.
For all of 2020, Bank of America reported a revenue of $85.5 billion, a decline from $91.2 billion in 2019. Net income for the year totaled $17.9 billion, a sharp drop from $27.4 billion in 2019.
Ken Sweet is an AP business writer. PBN contributed to this article.
