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Bank of America Exceeds Profit Expectations Despite Revenue Miss and Reduced Loan Loss Reserves

Bank of America (Daily News X)

On Tuesday, Bank of America reported fourth-quarter profits that exceeded analysts’ expectations by releasing a portion of the cash it had previously set aside for loan losses. The bank’s profit decreased by 28% to $5.47 billion, or 59 cents per share, outperforming the 55-cent estimate by analysts surveyed by Refinitiv. Revenue dropped 10% to $20.2 billion, falling short of estimates by approximately $500 million.

Bank of America shares experienced a slight decline of less than 1%. The bank announced the release of $828 million from reserves, resulting in a $53 million provision for credit losses in the last quarter of 2020. This follows $11.3 billion in provisions recorded over the previous three quarters.

“In the fourth quarter, we continued to see signs of a recovery, led by increased consumer spending, stabilizing loan demand by our commercial customers, and strong markets and investing activity,” CEO Brian Moynihan stated. “The latest stimulus package, continued progress on vaccines, and our talented teammates — who performed well helping their customers through this crisis — position us well as the recovery continues.”

A portion of the revenue shortfall was attributed to underperformance in Bank of America’s trading division. The firm reported $1.74 billion in fixed-income revenue, below the $2.11 billion estimate by analysts surveyed by FactSet, due to weaker performance in macro products and mortgages. Equities revenue of $1.32 billion slightly surpassed the $1.22 billion estimate but was muted compared to JPMorgan’s record fourth-quarter results and Goldman Sachs’ strong equities revenue.

Earlier in the day, Bank of America announced plans to repurchase $2.9 billion in shares during the first quarter, along with approximately $300 million in shares to offset stock given to employees. The bank also stated it would maintain its 18-cent quarterly dividend.

Last week, competitors JPMorgan and Citigroup posted profits that exceeded analysts’ expectations, releasing a combined $4.4 billion in loan-loss reserves. In 2020, Bank of America shares dropped 15%, compared to the 4.3% decline of the KBW Bank Index.

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