BofA Gets Boost From Loans as Consumers Start Borrowing Again
Bloomberg
Published Jan 19, 2022 12:54
(Bloomberg) -- Bank of America Corp (NYSE:BAC) saw loan growth return with consumers and businesses beginning to take on debt again, while the company’s traders missed analysts’ expectations.
Average loan balances were up 1% in the fourth quarter from a year earlier. Lending has been a key focus for investors after demand remained weak for much of 2021. That’s normally a bad sign for banks, but executives attributed depressed borrowing demand on companies and individual customers being flush with stimulus cash.
“Our fourth-quarter results were driven by strong organic growth, record levels of digital engagement and an improving economy,” Bank of America Chief Executive Officer Brian Moynihan said in a statement Wednesday. “We grew loans by $51 billion and added $100 billion of deposits during the quarter, further strengthening our position as the leader in retail deposits.”
The banking giant’s results provide a look at how the U.S. economy fared during the last three months of 2021 as the omicron variant emerged. Average loan and lease balances of $945 billion in the fourth quarter were more than analysts’ estimate of $940 billion. The turnaround signals the economy is holding up even as the Covid-19 pandemic lingers.
Bank of America shares rose 2.3% to $47.31 at 6:53 a.m. in early New York trading. The Charlotte, North Carolina-based company had climbed 41% in the past 12 months, compared with a 34% increase for the KBW Bank Index.
Rival JPMorgan Chase & Co. (NYSE:JPM), which reported results last week, said both commercial and consumer loans fell from a year earlier in the fourth quarter. At Wells Fargo (NYSE:WFC) & Co., consumer loans dropped and total commercial borrowing ticked up only slightly.
At Bank of America, net interest income, or revenue from customer loan payments minus what the company pays depositors, rose 11% from a year earlier to $11.4 billion.
In sales and trading, Bank of America reported revenue of $2.9 billion, down 2% from a year earlier. Analysts had estimated $3.1 billion. The trading boom set off by the market volatility of Covid-19 is starting to fade, and companies are having to contend with higher costs to prevent employees from defecting.
Investment-banking fees climbed 26% to $2.4 billion as the company’s dealmakers capitalized on a combination of cheap financing for buyers and attractive valuations for sellers, which spurred a wave of acquisitions. Advisory fees totaled $850 million, up 55% from a year earlier.
With the risk of widespread credit defaults fading further, Bank of America released $851 million in reserves in the fourth quarter. That follows a $1.1 billion release in the previous three months. Noninterest expenses rose 6% to $14.7 billion, driven in part by higher compensation. The company said it expects expenses to be little changed in 2022.
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Client balances in the Merrill Lynch Wealth Management business rose 14% to a record $3.2 trillion, while assets under management increased 17% to $1.3 trillion.
Also in Bank of America’s fourth-quarter results:
- Net income climbed 28% to $7 billion, or 82 cents a share. Adjusted earnings were expected to total 75 cents a share, the average estimate in a Bloomberg survey.
- Companywide revenue totaled $22.1 billion, compared with an average estimate of $22.2 billion.
- Debt-underwriting fees rose to $984 million, and equity-underwriting fees declined to $545 million.
©2022 Bloomberg L.P.
Written By: Bloomberg
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