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Bank of America Crushes Q4 Estimates: Stock Could Rise



Key takeaways

On January 16, Bank of America (BAC) reported stronger-than-expected fourth-quarter results. Increased net interest income driven by higher rates and growth in loans and deposits drove fourth-quarter revenues. Plus, higher asset management fees and higher card income further supported the top line. Meanwhile, higher revenues, operating leverage, a lower effective tax rate, and share repurchases supported fourth-quarter earnings, which recorded stellar growth.

Bank of America’s credit quality improved with lower provisions for credit losses. Non-performing assets declined $1.5 billion to $5.2 billion. The efficiency ratio improved to 58% from 62%, reflecting lower noninterest expenses.

Overall, Bank of America reported strong financial numbers in the fourth quarter. In comparison, JPMorgan Chase (JPM) disappointed with its fourth-quarter results and missed analysts’ expectations as lower fixed income revenues and higher-than-expected provisions remained a drag.

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Meanwhile, Citigroup (C) missed analysts’ sales estimate owing to the decline in fixed income revenues. However, its earnings surpassed estimates on the back of lower expenses, share buybacks, and a decline in the effective tax rate. Wells Fargo (WFC) reported weak revenues for the fourth quarter, as a decline in loans and deposits affected the top-line growth. However, the bank’s bottom line exceeded analysts’ estimate, driven by lower outstanding share count.

Key financials

Bank of America posted total revenues of $22.9 billion, which came in ahead of analysts’ expectation of $22.4 billion. Higher loans and deposits, higher rates, and increased asset management fees drove the top-line growth.

Bank of America posted adjusted earnings of $0.70 per share, which handily exceeded analysts’ estimate of $0.63.


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