Bank of America Profit Climbs on Rate Cuts
CHARLOTTE, N.C. – Bank of America Corp., the No. 3 U.S. bank holding company, said on Tuesday its fourth-quarter net income jumped 49 percent as growth in fees from selling credit cards and helping companies with bond offerings offset a rising number of bad loans in the recession.
Low U.S. interest rates after the Federal Reserve's 11 reductions last year lowered borrowing costs for banks and spurred loan demand, boosting profits at their credit-card and mortgage operations.
This offset increases in bad loans. Bank of America took $231 million in losses in the quarter for loans to energy trader Enron Corp., whose massive bankruptcy, the largest ever, hurt many banks in that time.
``Our three major business lines -- consumer and commercial banking, asset management and global corporate and investment banking -- in total increased their revenues by 8 percent last year,'' Bank of America Chairman and Chief Executive Ken Lewis said in a statement. ``Their achievement allowed us to overcome significantly higher credit costs plus much lower equity market-related revenues and still increase operating earnings for the year.''
The company reported net income of $2.06 billion, or $1.28 a share, in the fourth quarter, compared with $1.39 billion, or 85 cents a share, a year earlier.
Wall Street had expected a profit of $1.15 to $1.30 a share, with a mean estimate of $1.24, according to research firm Thomson Financial/First Call.
Revenues rose 10 percent to $8.9 billion in the fourth quarter from a year earlier.
Net interest income, or money the bank makes from lending, rose 16 percent to $5.50 billion, as lower U.S. interest rates failed to offset money Bank of America had to set aside to protect against problem loans. The company also has been scaling back its balance sheet recently to end ties with corporate clients that only borrow money.
Noninterest income rose 2 percent to $3.40 billion on fees the bank earns from credit cards, servicing accounts and making mortgage loans to people. Higher bond underwriting fees also added to results.
Net charge-offs, or loans for which the company does not expect repayment, rose to $1.2 billion from $1.1 billion a year ago.