Bank of America profit beats estimates on loan growth and mergers and acquisitions

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A Bank of America logo is pictured in the Manhattan borough of New York City, New York, U.S., January 30, 2019. REUTERS/Carlo Allegri

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Jan 19 (Reuters) – Bank of America Corp (BAC.N) reported a better-than-expected 30% rise in quarterly profit on Wednesday, driven by loan growth as well as record M&A volumes that helped to boost its investment banking business, pushing its shares up 1.9%.

Cash-rich and emboldened by soaring stock valuations, major buyout funds, corporations and financiers closed deals worth billions of dollars in the fourth quarter, generating record advisory fees of $850 million. dollars for BofA, up 55% over the previous year.

A recovery in consumer spending on credit and debit cards and a strong performance in the bank’s trading and advisory businesses also helped boost earnings.

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Average loans and leases, excluding those in the government-backed Paycheck Protection Program (PPP), were up 3.4% from the prior quarter and 3.2% from year-ago period, driven by strong commercial loan growth and higher card balances.

This compared to a 6% increase in average loans at JPMorgan Chase & Co (JPM.N). In contrast, Wells Fargo & Co posted a 3% decline, although it noted positive upward trends in the last six weeks of 2021. Read more

“(Loan growth) is very consistent. It’s very broad – across global markets, wealth and consumers. It’s hard to see that trend interrupted right now,” said Bank of America’s chief financial officer, Alastair Borthwick, on a call with reporters. .

“There’s a lot out there in terms of…potential stored up for future loan growth.”

Combined spending on credit and debit cards rose 22% to $212 billion in the last quarter.

Overall earnings were $6.77 billion, or 82 cents per share for the quarter ended Dec. 31, beating analyst estimates of 77 cents per share, according to Refinitiv’s IBES estimate.

The bank reported revenue, net of interest expense, of $22.1 billion, up 10% from a year earlier.

Bank of America’s net interest income (NII) – a metric that measures the difference between interest earned on loans and paid on deposits – rose nearly 11% to $11.41 billion, helped by significant growth in loans and deposits.

Borthwick also forecast robust NII growth for 2022 compared to last year.

“That assumes rising rates in the forward curve and lending dynamics,” he said.

WAGE INFLATION

Revenue from the bank’s equity division rose 3% in the quarter, while fixed income trading revenue fell 10% as share prices continued to soar despite temporary setbacks in the variant of the Omicron coronavirus and a hawkish Fed.

Bank of America also released $851 million from its reserves for pandemic-related losses that did not materialize.

Non-interest expense increased 6% due to higher revenue-related compensation. Read more

Bank of America, like other major investment banks and wealth managers, saw increased spending on bonuses and other revenue-based compensation as bankers and financial advisers made the most of the business of capital markets in the second half.

Unlike its peers, Bank of America said it expects spending to be flat for 2022 compared to 2021 based on estimates that some pandemic-related costs will decline this year.

“What will come out over time are some of the stubborn costs of COVID,” Borthwick said on the call.

For example, Borthwick said it currently costs more than usual to run a branch. This is partly due to the cost of masks, hand sanitizer, new ventilation systems, additional cleaning and, sometimes, additional benefits for frontline workers.

Additionally, Borthwick said the bank expects additional savings from more customers using digital banking.

Evercore ISI analyst Glenn Schorr said Bank of America’s expectations for fixed spending this year make it exceptional among its peer group, as others have so far forecast spending to rise. in 2022.

Morgan Stanley (MS.N) also beat quarterly earnings expectations on Wednesday, capping a mixed earnings season for the nation’s biggest banks. Read more

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Reporting by Niket Nishant, Noor Zainab Hussain in Bengaluru and Elizabeth Dilts Marshall in New York; Additional reporting by Manya Saini; Editing by Anil D’Silva and Nick Zieminski

Our standards: The Thomson Reuters Trust Principles.

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