Bank of America Corp (NYSE:BAC) disappointed Wall Street with a 14 percent decline on fourth quarter results, reporting a quarterly earnings of $2.74 billion, at 25 cents per share applicable to common shareholders, on revenue of $19 billion after tax adjustments. Analysts on average expected earnings at 32 cents a share, while earnings on the same period for the previous year was at 29 cents per share.
Taking out the effect of adjustments to net interest income on account of falling interest rates, as well as debt valuation adjustments, revenue is at $20.2 billion, falling from the $22.1 billion posted for last year. Without such items, earnings was at $32 cents, beating estimates by a penny.
According to Bank of America Corp (NYSE:BAC) Chief Financial Officer Bruce Thompson, the fourth quarter had been particularly challenging. The bank, U.S.’ second largest in terms of assets, is expecting to earn $3.7 billion more, up from past estimates of $3.1 billion, once interest rates for loans and securities increase by a percentage point. A bank’s yield from loans and securities increase when interest rates rise because most of its loans are specifically linked to interest rates.
A weaker revenue on bond trading also put pressure on earnings. Bank of America Corp (NYSE:BAC) sustained a decline of 30 percent to $1.46 billion from trading corporate and mortgage securities, two of its core business.
Operating expenses for the quarter fell 18 percent at $14.2 billion. Legal cost is also down 83 percent at $393 million, as against $2.3 billion the previous year. Overall, the bank spent a total of $16.65 billion on litigation costs, after a settlement with the U.S. Department of Justice earlier in August the previous year. “In 2014, we continued to invest in our businesses while reducing expenses and resolving our most significant litigation matters,” said Bank of America Corp (NYSE:BAC) Chief Executive Officer Brian Moynihan in a statement.
This article has been written by Nonito Guntan.
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