BofA Profit Jumps 9.4% on Fixed-Income Gain, Beats Estimates

  • Fixed-income revenue climbs 20% on rates, credit products
  • Expenses decline 2% to $13.9 billion, matching some estimates

Morgan Stanley, BofA Results: Costs Boost Profits

Bank of America Corp., the second-biggest U.S. lender, said profit rose 9.4 percent as fixed-income trading revenue climbed more than the company predicted as recently as last month and expenses shrank.

Fourth-quarter net income increased to $3.34 billion, or 28 cents a share, from $3.05 billion, or 25 cents, a year earlier, the Charlotte, North Carolina-based company said Tuesday in a statement. Excluding accounting adjustments, profit was 29 cents a share, beating the 27-cent average estimate of 27 analysts surveyed by Bloomberg.

Chief Executive Officer Brian T. Moynihan, 56, is trimming expenses as low interest rates and volatile markets stymie revenue growth. Since taking over in 2010, he’s dealt with charges tied to his predecessor’s acquisitions of Countrywide Financial Corp. and Merrill Lynch & Co., which have contributed to more than $70 billion in costs since the financial crisis.

Trading Revenue

Adjusted revenue from trading operations rose 11 percent to $2.65 billion, driven by fixed income, which climbed 20 percent to $1.76 billion. That beat the $1.55 billion average of four analysts surveyed by Bloomberg and exceeded the “mid-single digits" increase Moynihan estimated at an investor conference in December.

Fixed-income gains reflected higher volumes and improvements across most products, especially in rates and credit-related offerings, the bank said. Revenue from equities trading slid 3 percent to $882 million. That compares with the average estimate of $964 million.

“Our forecast at that time assumed that there would be a seasonable slowdown in December” in fixed income, Chief Financial Officer Paul Donofrio said on a call with reporters. “But our performance just came in better and stronger than we expected. Again, client activity. People needed to hedge and do things."

Total revenue rose 4.3 percent to $19.5 billion from a year earlier. Expenses fell 2 percent to $13.9 billion, matching the estimate of David Konrad, a Macquarie Group Ltd. analyst.

Oil Exposure

Donofrio said the bank’s total energy-related exposure is $21.3 billion on a utilized basis, or 2 percent of outstanding loans. Total write-offs rose to $1.1 billion from $200 million in the previous quarter, driven mainly by soured energy loans.

Bank of America gained 1.8 percent to $14.72 at 8:13 a.m. in New York. The shares slipped 6 percent in the past year through Jan. 15, compared with the 5.5 percent decline in the 24-company KBW Bank Index.

Bank of America said last month that it would take a $600 million pretax charge in the quarter to redeem $2 billion of trust-preferred securities tied to Merrill Lynch as the instruments lost preferential regulatory treatment. The firm also posted a $290 million charge tied to U.K. tax credits.

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