Bank of America Corp stock fell 1% on Friday, after the bank reported a sharp decline in quarterly profit from a year ago and revenue that fell short of estimates.
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It said its fourth-quarter net income fell to $3.1 billion, or 35 cents per share, for the quarter, from $7.1 billion, or 85 cents per share, in the corresponding period a year earlier.
The figure includes one-time items the bank noted earlier this week, when it said it would book non-cash pre-tax charges of about $1.6 billion in its fourth-quarter report in connection with the global shift away from the index used to replace the London Interbank Exchange. The quoted price, or LIBOR.
The impact will be added back into interest income in later periods, largely through 2026, according to its filing, the bank said.
The accounting adjustment follows the discontinuation of the Bloomberg Short-Term Bank Yield Index, which Bank of America uses as a way to calculate interest rates on some of its business loans.
It comes after the US Federal Reserve and other banking regulators moved to end the use of Libor from mid-2023.
Excluding these items, earnings per share came in at 70 cents, ahead of the FactSet consensus of 53 cents, but revenue fell 10% to $22.0 billion, below the FactSet consensus of $23.7 billion.
Bank of America's stock price fell 35 cents to close at $32.80 per share.
Bank of America missed its revenue expectations, mostly due to lower-than-expected securities trading revenues and traditional lending income, said James Shanahan, an analyst at Edward Jones.
“Strong business and credit card lending contributed to modest loan growth during the quarter,” he said. “However, the lending margins
declined, especially in the global markets business.
Like all major banks, Bank of America took a $2.1 billion charge from the Federal Deposit Insurance Corp., as a result of the bankruptcy of Silicon Valley Bank and Signature Bank last year. The fee is an offset to the billions the FDIC has spent to provide coverage for uninsured deposits.
Net interest income fell 5% to $13.9 billion, as higher deposit costs and lower deposit balances offset higher asset returns. Non-interest income decreased by $1.8 billion to $8.0 billion.
The bank said higher fees for asset management and investment banking were offset by lower market making and similar activities.
Provisions for loan losses increased by $12 million to $1.1 billion. Average bank deposits rose 2% to $1.9 trillion, while average loans and leases rose modestly to $1.1 trillion.
By segment, Bank of America's consumer banking division generated net income of $2.8 billion, as revenue fell 4% to $10.3 billion. The Global Wealth and Investment Management segment generated net income of $1 billion, with client balances rising 12% to $3.8 trillion, driven by higher market valuations and positive net client flows.
The global banking division generated net income of $2.5 billion, with investment banking fees rising 7% to $1.1 billion.
The Global Markets division generated net income of $636 million, with sales and trading revenue up 3% to $3.6 billion. Fixed income, currencies and commodities, or FICC, income fell 4% to $2.1 billion, while equity trading revenue rose 13% to $1.5 billion.
Bank of America's earnings were “modest” as the impact of interest rate headwinds was only partially offset by strong organic growth and expense discipline, said Peter Nerby, an analyst at Moody's Investors Services.
The stock is down 3.8% in the past 12 months, while the S&P 500 SPX,
It has gained 20%.
