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Bank of America reported better than expected fourth quarter earnings before the bell Wednesday. However Of three main divisions, only its global markets business posted a quarterly increase in profit. $BAC followed Citigroup $C JPMorgan Chase $JPM. Wells Fargo $WFC

Bank of America Mortgage

Bank of America Corporation NYSE: BAC Reported Earnings Before Open Wednesday

$0.56 Beat $0.51 EPS Forecast and $23.00 billion Beat $22.79 Billion Forecast in Revenue

Earnings

Bank of America fourth quarter profit was $7 billion, a 4% decline from a year earlier. However earnings per share were 74 cents, an unexpected 6% increase, helped by a reduction in outstanding shares. (do we call this manipulation?) beating the 68 cent estimate of analysts surveyed by Refinitiv. Revenue fell 1% to $22.5 billion, edging out the $22.35 billion estimate.

Bank of America Corporation NYSE: BAC

Market Reaction: Pre-market 34.58 USD −0.74 (-2.08%)

Highlights

“In a steadily growing economy marked by solid client activity, our teammates produced another strong quarter and year, allowing us to increase investments in our customers, communities, and employees,” CEO Brian Moynihan said in the release. “We also delivered for shareholders in 2019 by returning a record $34 billion in excess capital through dividends and share repurchases.”

Bank of America Q4 2019 earnings

Of the bank’s three main divisions, only its global markets business posted a quarterly increase in profit.

  •  Trading division had a 13% increase in earnings to $574 million as bond trading revenue surged 25% to $1.8 billion, exceeding the $1.68 billion estimate.
  • Stock trading produced $1 billion in revenue, a 4% decline and just under the $1.07 billion estimate.
  • The impact of lower interest rates was felt widely at Bank of America, impacting its core lending and banking operations.
  • Companywide net interest income fell 3% to $12.3 billion, and the bank’s net interest margin fell 17 basis points to 2.35%, just under analysts’ 2.36% estimate.
  •  Retail bank profit dropped 10% to $3.1 billion on the impact of lower rates.
  • The company also cited interest rates as a reason for lower revenue in its global banking and wealth management divisions.
  • Consumer Banking revenues decreased 4%, mainly due to lower net interest income and the absence of a modest one-time gain recorded in the prior-year quarter.
  • Revenues at the Global Wealth and Investment Management unit declined by 2%.
  • There was a 1% dip in Global Banking revenues during the quarter when higher leasing-related revenue and investment banking fees were more than offset by lower net interest income\
  • Global Markets revenues moved up 6%. During the three-month period, net interest income dropped 3% hurt by lower interest rates, which was partially offset by loan and deposit growth.
  • Book value per share grew 9% annually to $27.32. Average loan and lease balances advanced 6% to $936 billion, with consumer loans and commercial loans growing 7% and 6% respectively. At $1.4 trillion, average deposit balances were up 5%.

The second-biggest U.S. lender after J.P. Morgan Chase is among the most sensitive of large banks when it comes to changes in interest rates, according to analysts,Wall Street expected a net Interest Margin of 2.36%, according to FactSet Trading Revenue: Fixed Income $1.68 billion, Equities $1.07 billion


 

 Source: BAC, AlphaStreet

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