Author: Arasu Kannagi Basil and Saeed Azhar
(Reuters) - Bank of America beat profit expectations on Thursday as its traders benefited from a flurry of activity in the fourth quarter while the bank forecast more interest income in 2025.
The results were broadly in line with results from Wall Street rivals such as JPMorgan Chase & Co., Goldman Sachs, Wells Fargo and Citigroup, which have been boosted by strength in the stock market and investment banking business.
“All revenue streams increased, and we saw better-than-industry growth in deposits and loans,” said CEO Brian Moynihan. “This broad-based momentum sets the stage well for 2025. Base."
Net income at the second-largest U.S. bank rose to $6.7 billion, or 82 cents a share. That compares with profit of $3.1 billion, or 35 cents a share, a year ago.
On an adjusted basis, Bank of America earned 82 cents a share in the fourth quarter, beating analysts' expectations of 77 cents a share, according to estimates compiled by London Stock Exchange Group (LSEG).
The bank's shares rose 2.7% in premarket trading.
Bank of America's sales and trading revenue rose 10% to $4.1 billion, with the unit hitting record highs in both the fourth quarter and the full year. Fixed income revenue rose 13% on improved macro product performance and continued strength in credit, while equities revenue rose 6%, driven by greater client activity.
Stocks rose in the fourth quarter following the U.S. election, with investors betting on a friendlier business environment under President-elect Donald Trump.
The S&P 500 had a stellar year, ending 2024 up 23.3% after setting 57 all-time closing highs.
Bank of America's wealth and investment management arm also benefited from rising stocks, attracting more client money. Its revenue rose 15% to $6 billion, while customer balances rose 12% to a record $4.3 trillion.
Meanwhile, Wall Street profits rebounded last year as M&A deal volume rebounded in 2023 from a decade low.
Bankers expect stronger deals in 2025, helped by Trump's vows to implement pro-business policies.
Bank of America's investment banking expenses surged 44% to $1.7 billion in the fourth quarter compared with the same period last year, but overall net income at its global banking unit fell due to higher spending on staff and technology.
Dealogic data shows that global investment banking revenue across the industry jumped 26% to $86.8 billion, with North America growing by 33%. Bank of America's revenue ranks third among global banks.
Bank of America's rivals also earn higher fees by advising clients on transactions and by underwriting stock and bond offerings.
Investment banking fees rose 49% at JPMorgan, 24% at Goldman Sachs, 59% at Wells Fargo and 35% at Citigroup.
NII will continue to grow in 2025
Bank of America's net interest income (the difference between a bank's loan income and deposit payments) rose 3% in the quarter from a year ago to $14.4 billion, driven primarily by market activity, repricing of fixed-rate assets and loan growth Pushed.
The figure exceeded analysts' average fourth-quarter estimate of $14.27 billion.
This is the first time since the third quarter of 2023 that Bank of America has reported year-over-year NII growth.
Chief Financial Officer Alastair Borthwick told reporters on a conference call, "We believe that we can continue this development trajectory of NII at this time." "The economy is doing well, our asset quality is healthy and consumers are still spending."
Bank of America expects first-quarter NII to be $14.5 billion to $14.6 billion, higher than analysts' expectations of $14.36 billion. NII is expected to climb to a range of $15.5 billion to $15.7 billion in the fourth quarter.
"Clearly the outlook for loan profitability is improving in 2025 due to a steeper yield curve, easing deposit cost pressures and expectations of modest loan growth," said Argus Research banking analyst Stephen Biggar.
Rising interest rates have depressed NII in recent quarters as lenders spend more to retain customers' deposits. Moynihan said last month that he expects NII to continue growing through 2025.
Bank of America's NII is also expected to benefit from a repricing of fixed-rate assets and securities portfolios toward higher-yielding assets over time.
A steeper yield curve is also good for banks because they can borrow money at lower short-term rates and lend at higher long-term rates, thus increasing interest income.
Bank of America shares are up 30.5% in 2024, underperforming rivals JPMorgan Chase, Wells Fargo and Citigroup, as well as the KBW Bank Index.
U.S. banking regulators last month slapped regulatory penalties on Bank of America for flaws in its anti-money laundering program.
Borthwick said the bank has been working closely with the Office of the Comptroller of the Currency over the last year to improve its "know your customer" and anti-money laundering programs but does not believe the penalties will have much material financial impact.
(Reporting by Arasu Kannagi Basil in Bengaluru and Saeed Azhar in New York; Editing by Lananh Nguyen, Anil D'Silva and Rod Nickel)