Dive Brief:
- Bank of America on Tuesday reported a 21.7% drop in profit over the fourth quarter — to $5.47 billion from $6.99 billion a year earlier.
- The nation's second-largest bank released $828 million of its reserves, following the lead of its competitors JPMorgan Chase and Citi, which reported releases of $2.9 billion and $1.5 billion, respectively, on Friday. Banks had built up set-asides for several straight quarters to cushion against loan defaults during the coronavirus pandemic and to meet tougher accounting standards.
- On a more granular level, several measures saw double-digit percentage-point dips. Net interest income dropped 16% to $10.3 billion, a slide the bank blamed on lower interest rates. Overall revenue fell 10% to $20.1 billion, but that decrease was even more pointed — 13% — in consumer banking, which the bank said suffered from a lull in credit card activity.
Dive Insight:
Fixed-income trading, a saving grace for many large U.S. banks during the COVID-19 year, didn't pay off as handsomely for Bank of America as it did for some of its peers. The Charlotte, North Carolina-based lender saw a 7% swell there, compared with a 15% jump for JPMorgan.
However, deposits rose 23% in the fourth quarter at Bank of America, compared with a year earlier. And investment banking fees ballooned 26%, buoyed by equity underwriting and fees it collected from mergers and acquisitions.
"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," Bank of America CEO Brian Moynihan said in a statement Tuesday accompanying the earnings figures. "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."
The bank said its board authorized the repurchase of $2.9 billion in shares through March — the maximum allowed by the Federal Reserve when it last month approved banks to resume stock buybacks.
Net charge-offs for the quarter fell about 8% from a year earlier, to $881 million, but Bank of America's commercial banking unit saw an uptick in that category.
