Bank of America Corp (NYSE:BAC) posted fourth-quarter profits that topped forecasts as revenue from fixed-income trading increased and expenses dropped. The nation’s third-largest bank by market capitalization (second-largest by assets) reported 4Q profit of $0.40 per share, beating the estimate for $0.38. Adjusted revenue came in at $20.0 billion, missing the estimate for $20.85 billion.
Chief Executive Officer Brian Moynihan has been focusing on cutting costs at BOA for years even as the financial sector has had to deal with low interest rates. It’s a mid-to-long-term strategy that is now starting paying off, posting a 46.8% rise in profit.
“We had strong results in 2016 because our strategy is working. We are lending more and seeing historically low charge-offs, which is what responsible growth is all about. Revenue was up modestly, but EPS grew by 15% as we continued to manage our expenses and create operating leverage,” Mr. Moynihan in a statement. “With strong leadership positions in our businesses against a backdrop of rising interest rates, we are well-positioned to continue to grow and deliver for our shareholders in 2017.”
Revenue from fixed income trading increased by 12% to $1.96 billion, slightly missing analysts’ expectations for $2.1 billion, while equity trading gained 11 to $948 million, matching the median forecast. Total revenue increased 2.1% to $20 billion, which also fell shy of estimates calling for $20.8 billion, but expenses fell 6% to $13.2 billion, significantly more than expected.
Compensation costs also declined by 2.6%.
Still, as of 7:45 AM EST, shares were down -0.12 (-0.52%) in pre-market trading to 22.80.
JPMorgan Chase & Co. (NYSE:JPM) and Wells Fargo & Co. (NYSE:WFC) are scheduled to report fourth-quarter results later Friday, while Morgan Stanley (NYSE:MS) will release earnings on Tuesday, followed by Goldman Sachs Group Inc. (NYSE:GS) and Citigroup Inc. Wednesday.