Bank of America Profit Rises Sharply -- 2nd Update

By Rachel Louise Ensign 

Bank of America Corp. said Wednesday that fourth-quarter earnings rose sharply, helped by rising interest rates and lower taxes.

Quarterly profit at the Charlotte, N.C.-based bank, the second largest in the U.S. by assets, was $7.28 billion, compared with $2.37 billion a year ago. Per share, earnings were 70 cents. Analysts polled by Refinitiv had expected 63 cents per share.

In the same quarter a year ago, the bank's profit was hit by a large one-time charge related to the corporate tax overhaul passed in late 2017. Excluding that charge, profit for the quarter was up 39%.

Fourth-quarter revenue was $22.74 billion, up from $20.44 billion a year ago. Analysts had expected $22.40 billion.

The bank's full-year 2018 profit of $28.15 billion is the largest in Bank of America's history.

Shares rose almost 5% in premarket trading.

The results are the latest example of how big lenders are benefiting from the Federal Reserve's rate increases. Higher rates mean banks can charge more for loans, and it usually means they have to pay more interest on deposits. But the Fed's slow and steady pace has allowed big banks to charge borrowers more without having to significantly increase payouts to depositors.

Bank of America paid 0.63% on U.S. interest-bearing deposits in the fourth quarter, compared with 0.50% in the third quarter.

Still, bank stocks have suffered in recent months. This is the last quarter in which earnings growth will benefit from favorable comparisons to a period when corporate tax rates were higher, and the Fed has signaled a more cautious approach to future rate increases.

Loans at Bank of America grew 1.2% from a year earlier, while deposits were up 5.5% over that period. Expenses were down 1.1%.

Profit rose in all of the bank's key businesses, from consumer banking to markets. But investment-banking revenue fell 4.9% in the fourth quarter from a year earlier. That unit has slipped in key businesses including U.S. mergers and last fall named a new head.

Trading revenue fell 5.8%. Competitors also posted trading declines due to market volatility in late 2018.

Write to Rachel Louise Ensign at [e-mail]

(END) Dow Jones Newswires

January 16, 2019 08:29 ET (13:29 GMT)

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