By Niket Nishant and Elizabeth Dilts Marshall
(Reuters) – Bank of America Corp on Wednesday reported a better-than-expected 30% rise in quarterly profit, driven by loan growth and record M&A volumes in its investment banking business.
Cash-rich and emboldened by soaring stock valuations, major buyout funds, corporations and financiers closed deals worth billions of dollars in the fourth quarter, generating record advisory fees of $850 million. dollars for BofA, up 55% over the previous year.
Loans increased during the quarter in all categories except home equity, with average loans and leases, excluding those in the government’s Paycheck Protection Program, in up 3.4% from the previous quarter and 3.2% from a year ago, the bank said.
This compares to a 6% increase in average loans at JPMorgan Chase & Co. In contrast, Wells Fargo & Co reported a 3% decline, although it noted positive upward trends over the past six months. weeks of 2021.
2021 started with “green shoots” and culminated “with $50 billion in record loan growth this quarter,” Bank of America chief executive Brian Moynihan said on a call with analysts.
“We note that these borrowers, both consumer and commercial, have a strong ability to continue borrowing,” he said.
The bank also released $851 million from its reserves for pandemic-related losses that did not materialize.
Combined spending on credit and debit cards rose 22% to $212 billion last quarter, and as consumers continue to pay down their balances, they also opened about 1 million new credit cards with of the bank in the last quarter.
Overall earnings were $6.77 billion, or 82 cents per share for the quarter ended Dec. 31, beating analyst estimates of 77 cents per share, according to Refinitiv’s IBES estimate.
The bank reported revenue, net of interest expense, of $22.1 billion, up 10% from a year earlier.
Bank of America’s net interest income (NII) – a metric that measures the difference between interest earned on loans and paid on deposits – rose nearly 11% to $11.41 billion, helped by significant growth in loans and deposits.
Chief Financial Officer Alastair Borthwick expects the NII to increase by “a few hundred million” in the first quarter of this year, compared to the fourth quarter of last year, “and progress well each following quarter in 2022 “.
Morgan Stanley also beat quarterly earnings expectations on Wednesday, capping a mixed earnings season for the nation’s biggest banks.
Revenue from the bank’s equity division rose 3% in the quarter, while fixed income trading fell 10% as stock prices continued to soar despite the variant’s temporary setbacks of the Omicron coronavirus and a hawkish Fed.
Non-interest expense increased 6% due to higher revenue-related compensation.
Bank of America, like other major investment banks and wealth managers, saw increased spending on bonuses and other revenue-based compensation as bankers and financial advisors made the most of market volatility in the second semester.
Unlike some peers, Bank of America said it expects spending to be flat for 2022 compared to 2021 based on estimates that some pandemic-related costs will decline.
“What will come out over time are some of the stubborn costs of COVID,” Borthwick said on a call with reporters.
Borthwick said running a branch now costs more. Additional costs come from masks, hand sanitizer, new ventilation systems, additional cleaning and, in some cases, additional benefits for frontline workers.
However, he said the bank expects additional savings from more customers using digital banking services.
Refuting analysts’ skepticism, Moynihan said he was confident the bank would be able to continue investing in technology and compensation packages that were attractive enough to recruit talent in a tight labor market and contain spending.
(Reporting by Niket Nishant, Noor Zainab Hussain in Bengaluru and Elizabeth Dilts Marshall in New York; Additional reporting by Manya Saini; Editing by Anil D’Silva, Nick Zieminski and Marguerita Choy)
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