Just in case you were getting comfortable throwing darts at your printout of the latest earnings report from Bank of America (NYSE: BAC ) , put those pointy projectiles aside for a moment, and read this. I guarantee you'll feel better afterwards.
The fact is, there were some golden nuggets tucked inside B of A's fourth-quarter earnings announcement, slivers of good news that bode well for the future of the bank, and its investors. Ready? Here are three meaty morsels to sink your teeth into.
No. 1: The mortgage business is booming. Compared with the fourth quarter of 2011, mortgage activity at Bank of America shot up by 41% by Q4 2012 -- good news for a bank that has been cringing at the idea of writing mortgages since the Countrywide implosion. $22.5 billion in new loans is nothing to sneeze at, though the year-over-year growth excludes correspondent loans from last year. B of A quit the correspondent business, so if we looked at the full year-over-year comparison, things wouldn't look quite as good.
Bank of America has its work cut out for it if it is to catch up to its peers, however. JPMorgan Chase (NYSE: JPM ) reported originations of $51.2 billion, up 33% from last year. For Wells Fargo (NYSE: WFC ) , the leader in home loan writing, the fourth quarter tally of $125 billion in originations was only a 4% rise from the year previous -- but then, it has the lion's share of the mortgage business.
No. 2: Merrill Lynch is pulling its weight, and then some. For the fourth quarter, net income for the wealth management division more than doubled versus the prior year , and it climbed 29% from full-year 2011 to full-year 2012. Assets under management grew by 10% from 2011 to 2012, and average deposits in its Global Banking segment increased 11% from the same time last year, and 5% from 2011 to 2012. All of this was accomplished as Merrill's broker headcount decreased by 9% from the previous year.
The bank was also ranked No. 2 in the world by Dealogic, an investment banking consulting firm, for raking in super-high investment banking fees.
No. 3: Capital cushions are overstuffed. B of A has worked hard to sock away enough cash to fulfill all global capital requirements, and it has really outdone itself -- as well as most other banks. Its Basel III Tier 1 ratio now stands at 9.25%, having risen from its previous quarter's high of 8.97%. By comparison, JPMorgan's Basel III ratio of 8.7% and Wells' 8.18% look positively anemic.
One Fool's take
Let's not forget the big news, either: B of A's profit rose from $1.4 billion in 2011 to $4.2 billion for 2012. That news is excellent all on its own, but putting all the pieces together paints a picture of a bank that will surely ace the government's upcoming stress test. For investors, that might very well mean stock buybacks and a nice dividend -- the greatest news of all.
B of A is cooking with gas, but still has several hurdles to jump before it is hale and hearty again. To learn more about the most talked-about bank out there, check out our in-depth company report on Bank of America. The report details Bank of America's prospects, including three reasons to buy and three reasons to sell. Just click here to get access.