Bank of America Tops Q4 Earnings Forecast With Solid Loan Growth

Bank of America follows rivals JPMorgan and Citigroup with stronger-than-expected fourth quarter earnings even as interest rate margins continue to shrink.

Bank of America  (BAC) - Get Report posted better-than-expected fourth-quarter earnings Wednesday as loan growth offset narrowing interest rate margins at the consumer-focused lender.

Shares in the group opened weaker, however, after it cautioned that net interest income would likely be lower this year than in 2019, 

Bank of America said earnings for the three months ending in December came in at 74 cents per share, up 5.7% from the same period last year and 6 cents ahead of the Street consensus forecast. Group revenues, the bank said, fell 1% to $22.5 billion, just ahead of analysts' forecasts of a $22.35 billion tally.

Net interest income was pegged 3% lower from last year at $12.3 billion, while its net interest margin slipped 7 basis points from the last quarter to 2.35%.  However, average loan and lease balances rose 6% to 936 billion. Fixed income trading revenues rose 255 to $1.8 billion, partly offsetting a 4$ slide in equities trading revenues at $1 billion. 

Bank of America Earnings graphic

“In a steadily growing economy marked by solid client activity, our teammates produced another strong quarter and year, allowing us to increase investments in our customers, communities, and employees, while keeping a close eye on expenses," said CEO Brian Moynihan. "We also delivered for shareholders in 2019 by returning a record $34 billion in excess capital through dividends and share repurchases. As evidenced by a quarter in which our customer deposits surpass."  

Bank of America shares were marked 2%  lower following the earnings release to change hands at $34.58 each, a move that extends the stock's six-month gain to around 20%.

Bank of America's earnings improvement followed stronger-than-expected reports Tuesday from rivals JPMorgan Chase  (JPM) - Get Report and Citigroup  (C) - Get Report, each of which saw compression in net interest margins, a key metric for bank profits that indicates the difference between the interest a bank pays on deposits and what it collects on investments. 

One way banks can combat this compression, which is typically associated with a low interest rate environment, is by cutting costs and controlling expense. 

Bank of America said its fourth quarter non-interest expenses were essentially flat to last year at $13.2 billion, a figure that fell largely in-line with Street forecasts.