Bank Of America’s Stock Drops 2% After Earnings Almost Dropped

(CTN News) – Bank of America Corporation stock fell 2% Friday after the bank posted lower quarterly profit and revenue than expected.

For the quarter, the Bank of America BAC, -1.06% reported a net income of $3.1 billion, or 35 cents per share, down from $7.1 billion, or 85 cents per share, a year earlier.

In its fourth-quarter report, the bank said it would book a noncash pretax charge of about $1.6 billion related to the global transition away from an index that replaced London interbank offered rates, or Libor, one-time items it flagged earlier this week.

In a filing, the bank said the impact will be added back to its interest income in subsequent periods.

The Short-Term Bank Yield Index has been discontinued by Bank of America, which is the reason for the accounting adjustment.

Libor will cease to be used by 2023, according to the Fed and other regulators.

Aside from these items, earnings per share were 70 cents, ahead of the 53 cent FactSet consensus, but revenues were $22.0 billion, down from $23.7 billion.

As a result of lower lending income and securities trading revenues, Bank of America missed its revenue forecast.

During the quarter, business and credit card lending grew modestly. However, lending profit margins are lower
Global markets business declined, especially.”

As a result of Silicon Valley Bank and Signature Bank’s failures last year, Bank of America received a fee of $2.1 billion from the Federal Deposit Insurance Corp. Through the fee, the FDIC is reimbursed for billions spent on deposits that were not insured.

Increasing deposit costs and lower deposit balances led to a 5% decline in net interest income to $13.9 billion. A decline of $8.0 billion to $1.8 billion was recorded in noninterest income.

Investment banking and asset management fees are higher because of lower market-making activity.

There was an increase of $12 million in the provision for loan losses to $1.1 billion. Average deposits rose 2% to $1.9 trillion, while loans and leases rose modestly to $1.1 trillion.

In Bank of America’s consumer banking division, net income was $2.8 billion, while revenue dropped 4% to $10.3 billion. Net income in the wealth and investment management segment was $1 billion, with client balances rising 12% to $3.8 trillion, driven by higher market valuations and positive net client flows.

Investment banking fees rose 7% to $1.1 billion, bringing global banking net income to $2.5 billion.

Sales and trading revenue increased 3% to $3.6 billion in the global markets division, generating a net income of $636 million. A decline of 4% in FICC income to $2.1 billion was offset by growth of 13% in equities trading revenue to $1.5 billion.

Bank of America’s earnings, despite strong organic growth and expense discipline, were “modest.”

Stocks in the S&P 500 SPX, 0.08% have gained 20% over the last 12 months, while the stock has dropped 3.8%.

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