Bank of America Earnings: It Still Pays to Be in Banking
Shares of Bank of America (NYSE:BAC) jumped as much as 3 percent in premarket trading on Wednesday, setting a fresh 52-week high near $17.30 after the bank reported strong fourth-quarter results.
Total revenue excluding accounting adjustments climbed 13.8 percent to $22.3 billion for the three months ended December 31, beating the mean analyst estimate of $21.24 billion, while net income jumped 369 percent to $3.4 billion for the same period. Earnings jumped from 3 cents to 29 cents per share, beating the mean analyst estimate of 26 cents per share.
For the year, total revenue (also excluding accounting adjustments) fell about 1 percent to $91 billion, beating the mean analyst estimate of $89 billion. Earnings increased 260 percent to 90 cents per common share, beating the mean analyst estimate of 88 cents per share.
Improving credit conditions
Headline numbers aside, there’s a lot to like about Bank of America’s fourth-quarter results. A dramatic 84.8 percent decline in provisions for credit losses to just $336 million is a load off the bank’s back. Net charge-offs also declined significantly, falling 48.4 percent on the year to $1.6 billion. The net charge-off ratio — the rate at which debt has to be purged from the bank’s books — declined from 1.4 percent to 0.68 percent.