BAC Bank of America Corporation

By Rachel Louise Ensign 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (January 17, 2019).

Bank of America Corp. said Wednesday that fourth-quarter earnings rose sharply, helped by rising interest rates and lower taxes.

Quarterly profit at the Charlotte, N.C.-based bank, the second largest in the U.S. by assets, was $7.28 billion, compared with $2.37 billion a year ago. Per share, earnings were 70 cents. Analysts polled by Refinitiv had expected 63 cents per share.

In the same quarter a year ago, the bank's profit was hit by a large one-time charge related to the corporate tax overhaul passed in late 2017. Excluding that charge, profit for the quarter was up 39%. The bank's full-year 2018 profit of $28.15 billion is the largest in the lender's history.

In recent months, investors grew gloomy about banks' prospects and sold off shares. After Bank of America's earnings report, the lender's shares rose more than 7%, the largest increase in more than six years.

Fourth-quarter revenue was $22.74 billion, up from $20.44 billion a year ago. Analysts had expected $22.40 billion.

Bank of America was the latest big bank to benefit from the Federal Reserve's rate increases. Higher rates mean banks can charge more for loans, and it usually means they have to pay more interest on deposits. But the Fed's slow and steady pace has allowed big banks to charge borrowers more without having to significantly increase payouts to depositors. Bank of America paid 0.63% on U.S. interest-bearing deposits in the fourth quarter, compared with 0.50% in the third quarter.

The results also reflected CEO Brian Moynihan's yearslong revamp of the bank. Under his tenure, Bank of America has cut expenses, pared back risk and focused on plain-vanilla products like primary consumer checking accounts. Loans at Bank of America grew 1.2% in the third quarter from a year earlier, while deposits were up 5.5% over that period. Expenses were down 1.1%.

Bank of America's earnings were "best in class," wrote Susan Roth Katzke, an analyst at Credit Suisse Group AG.

Profit rose in all of the bank's key businesses, from consumer banking to wealth management and markets.

Investment-banking revenue, however, fell 4.9% in the fourth quarter from a year earlier. That business has slipped in key areas including U.S. mergers and last fall named a new head.

Trading revenue fell 5.8%. Competitors also posted trading declines due to market volatility in late 2018.

Banks are facing a number of growing challenges. This is the last quarter in which earnings growth will benefit from favorable comparisons to a period when corporate tax rates were higher, and the Fed has signaled a more cautious approach to future rate increases.

Bank of America Chief Financial Officer Paul Donofrio said on Wednesday that the lender can continue to increase net interest income -- revenue from interest -- without additional Fed rate increases, so long as loans and deposits continue to grow.

Write to Rachel Louise Ensign at rachel.ensign@wsj.com

(END) Dow Jones Newswires

January 17, 2019 02:47 ET (07:47 GMT)

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