Bank of America quarterly profit falls 4% on lower rates

January 16, 2020 10:04
Bank of America expects net interest income to decline through the first half of 2020 before picking up. Photo: Bloomberg

Bank of America reported a 4 percent decline in profit for the fourth quarter, a result attributed to lower interest rates that crimped the net interest income.

The earnings -- at nearly US$6.8 billion -- were however better than what analysts had been expecting, as the bank blunted some of the impact by growing loans at a rapid pace.

The results were also helped by bond trading, whose revenue rose 25 percent to US$1.8 billion, Reuters reports.

Overall, the net profit came in at US$6.75 billion, compared with US$7.04 billion a year earlier.

Excluding special items, the bank earned 75 cents per share, beating the average analyst estimate of 68 cents, according to Refinitiv.

Revenue fell slightly to US$22.35 billion.

Chief Financial Officer Paul Donofrio said net interest income will decline through the first six months of 2020.

The Charlotte, North Carolina-based lender is vulnerable to rate movements because of the composition of its balance sheet. The US Federal Reserve cut rates three times in 2019.

Donofrio expects to improve the interest income metric later this year by growing loans and reducing interest rates on deposits, but predicted that the figure will be “modestly” lower for the full year.

Consumer banking, the bank's biggest business saw revenue fall 5 percent to US$9.5 billion in the fourth quarter.

Net interest margin fell to 2.35 percent from 2.52 percent a year earlier, and compared with 2.41 percent in the prior quarter.

However, the bank grew its loans by 6 percent, far outpacing increases at Citigroup and JPMorgan Chase, Reuters noted.

Deposits expanded 5 percent, according to the report.

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