Jan 19 (Reuters) – Bank of America Corp on Wednesday reported a jump in fourth-quarter profit as strong growth in its credit business and buoyant M&A deals helped boost its banking division of investment.
After facing a steady erosion of their lending income due to very low interest rates, US banks should see some relief from this pressure, as the US Federal Reserve has hinted that it will raise rates in the course of the year.
Bank of America, the second largest US bank by assets and more sensitive to interest rate fluctuations than its rivals due to the composition of its balance sheet, will likely be one of the first beneficiaries of a higher rate environment.
Net interest income (NII), a particularly scrutinized measure of a bank’s performance on its lending business, rose nearly 11% in the fourth quarter to $11.41 billion.
Bank of America also benefited during the year from the surge in mergers and acquisitions (M&A) transactions worldwide, which resulted in a 55% jump in advisory fees to a record level of 850 million in the fourth quarter.
The bank has also reduced by $851 million its provisions for doubtful debts linked to the pandemic which have not materialized.
In New York, the action took nearly 2% in pre-market trading.
Bank of America’s fourth-quarter profit was $6.77 billion (5.97 billion euros), or $0.82 per share, from $5.21 billion, or $0.59 per share, a year earlier.
Analysts on average had expected earnings of $0.76 per share, according to IBES data from Refinitiv. (Reporting Niket Nishant, Noor Zainab Hussain and Manya Saini in Bangalore and Elizabeth Dilts Marshall in New York; French version Diana Mandiá, editing by Blandine Hénault)
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