Profitability: Comparing Bank of America and Wells Fargo

In 2016, Wells Fargo’s (WFC) revenues rose 3% to $88.3 billion, while revenues of Bank of America (BAC) rose 1% year-over-year to $83.7 billion.

Wells Fargo’s net interest income rose 5% to $47.8 billion, but its net interest margin fell 3 basis points year-over-year to ~2.9%. Meanwhile, Bank of America’s net interest income grew 5.4% to $42 billion. Bank of America’s net interest margins grew 6 basis points to ~2.3%.

Net interest margin is an important operating metric for banks (XLF). It’s measured as the spread between the interest income received by banks and the interest paid out to customers on deposits as a percentage of their interest-earning assets.

Wells Fargo (WFC) has long been one of the most profitable big banks in America. It turned in an ~1.2% return on average assets last year. JPMorgan Chase (JPM), meanwhile, generated return on assets (or ROA) of 1.0%.

In 2016, BAC generated ROA of 0.82%, which was lower than its target of 1%, while it generated $16.2 billion in profits.