Bank of America posted a profit that exceeded analysts' expectations of a recovery in trading volumes and share buybacks.
The bank's fourth quarter earnings were $ 7 billion, down 4 percent year over year, or 74 cents a share. This was an unexpected 6 percent increase supported by a decrease in outstanding shares. This number exceeded the estimate of 68 cents surveyed by Refinitiv. Revenue decreased 1% to $ 22.5 billion, exceeding the $ 22.35 billion estimate.
Of the bank's three main divisions, only global market business saw quarterly earnings growth. The company's Wall Street trading department saw a 13% increase in profits to $ 574 million as bond trading revenue increased 25% to $ 1.8 billion, an estimate of $ 1.68 billion exceeded. Stock trading generated $ 1 billion in sales, a 4% decrease just below the $ 1.07 billion estimate.
At Bank of America, the impact of lower interest rates was clearly felt. Net interest income fell 3% to $ 12.3 billion and the bank's net interest margin decreased 17 basis points to 2.35%, just below the 2.36% estimate.
"In a steadily growing economy characterized by solid customer activity, our teammates have had another strong quarter and year, which has enabled us to increase investment in our customers, communities and employees," said CEO Brian Moynihan in the press release. "We continued to care for shareholders in 2019 with a record $ 34 billion surplus from dividends and share buybacks."
According to analysts, the second largest US lender after J. P. Morgan Chase is one of the most sensitive large banks when it comes to interest rate changes. Investors will be excited to see how interest rates cut three times by the Federal Reserve last year impacted the quarter and 2020 outlook.
Last month Moynihan said the US economy remained strong as consumer spending continued to grow. He also said that fourth quarter trading revenues are expected to grow 7% to 8% year over year (his forecast proved conservative – quarterly trading revenues increased 13%) and investment banking revenues 3% to 4% 4%% higher.
The bank's shares rose more than 40% last year, surpassing the 29% increase in Standard & Poor & # 39; s 500.
On Tuesday, J.P. Morgan and Citigroup both made a profit that exceeded analysts' expectations for rising bond trading results and strong credit card revenue. Wells Fargo missed analysts' earnings estimates as it posted costs related to the fake account scandal.
This is what Wall Street expects:
Result: According to the refinitive, 68 cents per share, a decrease of 2.3% compared to the previous year.
Revenue: $ 22.35 billion, a 2.4% decrease from the previous year.
Net interest margin: 2.36% according to the FactSet
Trading Turnover: Fixed Income $ 1.68 billion, Equities $ 1.07 billion
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