Bank of America Earned More Than Expected. Why the Stock Is Slipping.
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Bank of America shares slid in early trading as the bank’s fourth-quarter earnings results topped analysts’ expectations but came in well below the year-earlier figure.
The quarterly profit for the bank totaled $5.5 billion, down from $7 billion in the year-ago quarter. Earnings per share were 59 cents a share, beating Wall Street’s expectations of 55 cents. Bank of America’s (ticker: BAC) revenue came in at $20.1 billion, short of the $20.6 billion forecast by analysts surveyed by FactSet, and 10% below the last three months of 2019.
Bank of America shares were down 2.5% in premarket trading but had been up more than 1%.
The bank’s results were helped by a $828 million release from its reserves for expected loan losses. Like all banks, Bank of America set billions aside earlier in 2020 to protect against potential loan losses as the coronavirus pandemic crippled much of the economy. While the economy is improving—though on an uneven path—many of the worst- case economic scenarios have been avoided, giving banks confidence to release some of their reserves into earnings.
Bank of America expressed optimism that the economic recovery is poised to continue.
“The latest stimulus package, continued progress on vaccines, and our talented teammates—who performed well helping their customers through this crisis—position us well as the recovery continues,” Brian Moynihan, chairman and chief executive at Bank of America, said in a statement.
Trading was a bright spot for the bank, continuing a trend seen across the sector for much of 2020. Revenue for the division climbed 14%, driven in large part by a 30% jump in equities-trading revenue. Trading in fixed income was down 5%.
In addition to releasing its fourth-quarter results, Bank of America said its board authorized the lender to repurchase up to $2.9 billion in stock. The buybacks come after the Federal Reserve temporarily halted banks from repurchasing shares to force them to conserve capital amid the crisis.
Goldman Sachs Group (GS) also reports results Tuesday. Morgan Stanley (MS) will report results Wednesday. JPMorgan Chase (JPM), Wells Fargo (WFC), and Citigroup (C) did so last week.
Write to Carleton English at carleton.english@dowjones.com