NEW YORK (AP) — Bank of America Corp. said its profits rose 28% last quarter from a year earlier, but the bank faced the same wage inflation as its Wall Street counterparts.
The bank said Wednesday that it earned a profit of $7.01 billion, or 82 cents per share, in the fourth quarter. That’s up from a profit of $5.47 billion, or 59 cents a share, in the same period a year earlier. Analysts surveyed by FactSet were expecting the bank to post a profit of 77 cents a share.
The bank, based in Charlotte, N.C., saw most of its businesses grow profits in the quarter. But much of the growth was in BofA’s investment banking division, which saw profits climb to $2.68 billion from $1.67 billion. Other banks with investment banking businesses saw a strong end to the year, as companies scrambled to close deals or go public.
In BofA’s consumer banking business, its largest division by revenue and profits, profits rose to $3.12 billion from $2.59 billion a year earlier. Consumers spent more on the bank’s credit and debit cards while expenses were lower.
The bank recently shook up the industry by announcing that it planned to cut overdraft fees to $10 from $35 as well as stop charging a variety of fees that often would impact the bank’s poorest customers.
Like its competitors, BofA is facing much higher compensation expenses. The bank spent $36.1 billion on wages and benefits last year, up 10% from a year earlier. BofA joined Goldman Sachs, JPMorgan Chase, and Citi in saying they were expecting to see higher salary costs as they compete for talent.
For the full year, Bank of America posted a profit of $30.56 billion, nearly double the $16.5 billion it earned in 2020 when the pandemic hit the global economy.
Annual earnings per diluted share rose from $1.88 to $3.60.
The rise in annual profits also reflected the release of millions in credit-loss provisions, which the company had built up in 2020 in anticipation of bad loans during the pandemic. Bank of America released $4.6 billion from its loan-loss reserves in 2021, compared with the $11.3 billion added to its stockpile in 2020.
In addition to record investment banking and asset management revenue In the fourth quarter, the company also saw gains in income from card and service fees, which together fueled $46.2 billion in annual interest income. This represented a 9.5% rise over a year ago.
Amid a continued low interest rate environment, however, the bank saw annual interest income fall 7.6% to $47.7 billion. Net interest margin – the difference between interest income generated and the amount paid out to lenders – also declined, down 24 basis points year-over-year to 1.66%.
The rise in spending on employee wages and benefits drove up noninterest expenses up by 8.2% to $59.7 billion.
Year-end assets stood at $3.2 trillion, a 12.4% year-over-year increase including $979.1 billion in loans and leases. Total deposits rose 15% to $2.1 trillion.
“We ended the year on a strong note,” Chief Financial Officer Alastair Borthwick said in a statement. “Revenue rose faster than expenses, producing our second straight quarter of year-over-year positive operating leverage. Also, we significantly grew loans and deposits, which allowed us to increase net interest income by $1.2 billion versus the year-ago quarter despite a challenging rate environment. In addition, our investment banking and wealth management businesses continued to benefit from robust markets and the strong relationships we have built with our clients over many years.”
PBN staff writer Nancy Lavin contributed to this report. You may reach her at Lavin@PBN.com.
