Bank of America posted earnings for the fourth quarter on Friday that beat Wall Street expectations saying it expects a substantial increase in net interest income for its ongoing quarter.
The firm posted per share earnings of 40 cents and revenue of just over $19.99 billion. Wall Street was expecting BOA to post 38 cents per share for profit with revenue reaching $20.85 billion.
CFO Paul Donofrio in a prepared statement said strong activity by clients and good discipline with expenses created a solid operating advantage for the quarter. While the rise recently in interest rates was too late to make an impact on results for the fourth quarter, the bank expects a significant increase in its net interest income for the 2017 first quarter, added Donofrio.
However, the return on its average common equity ended at 7%, far below the 10% for cost of capital.
BOA shares were higher during trading before Friday’s opening bell, but had given back higher gains from just prior to the results being released.
The bank announced that net interest income had increased by 6% to just over $10.3 billion during the just ended fourth quarter. At the same time, loan balances were up by $19 billion to reach $915.8 billion.
The banks net charge offs, which are a measure of costs for its bad debt, dropped from just over $1.1 billion to $880 million. BOA’s net charge off ratio made an improvement to 0.39%, which was a historic low the prepared statement said.
The credit losses provision was down from $811 million one year ago to $773 million.
The decline of the net charge-offs as well as provisions were a reason that BOA actually was able to beat expectations said a banking analyst on Wall Street early Friday.
Bank of America posted a rise in revenue of 12% in its fixed income trading. It posted an increase in revenue from equities trading of 7%, reflecting market activity increases following the election in November.
One analyst said the only negative found in the report was that capital markets and investment banking activity did not react positively during the fourth quarter.
The bank said as well that it repurchased over $5.1 billion worth of common stock and paid out $1.6 billion in dividends for common stock during 2016.
Since the November election, the financial sector has increased 17% making it the best S&P 500 performer. Over that same period, BOA has increased 35%.