Please ensure Javascript is enabled for purposes of website accessibility

Bank of America Fourth-Quarter Profits Top Estimates, but Revenue Falls Short

By Bram Berkowitz - Updated Jan 19, 2021 at 2:11PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Low interest rates continue to put pressure on the bank's net interest margin.

Bank of America (BAC 2.32%) reported a roughly $5.5 billion profit in the fourth quarter of 2020, or $0.59 in diluted earnings per common share, beating analysts' estimates on total profits, but revenue fell short of predictions.

In the full year of 2020, Bank of America reported a profit of $17.9 billion, or $1.87 diluted earnings per common share, down about 35% from full-year earnings in 2019.

The bank booked $881 million of net charge-offs (debt unlikely to be collected) in the fourth quarter. However, after releasing reserves of $828 million back into earnings, the provision for credit losses in the quarter only ended up being $53 million.

Bank of America

Image source: Bank of America.

"In the fourth quarter, we continued to see signs of a recovery, led by increased consumer spending, stabilizing loan demand by our commercial customers, and strong markets and investing activity," CEO Brian Moynihan said in a statement.

Low interest rates continued to put some pressure on the bank's net interest margin (NIM), the difference between what the bank makes on interest-earning assets such as loans and pays out on interest-bearing liabilities such as deposits. The NIM fell 1 basis point (.01%) and ended the quarter at 2.71%.

Loan demand also fell off a little bit from the third quarter, but Bank of America managed to grow net interest income from the third quarter of 2020 by deploying excess cash into its securities portfolio.

Its consumer bank, global wealth and asset management, and global banking divisions all increased their profits from the third quarter of 2020, but profits were still down compared to the fourth quarter of 2019.

The investment bank division experienced the opposite, seeing its profits fall from the third quarter of 2020 by nearly 12%, but growing profits significantly compared to the fourth quarter of 2019. Credit quality at the bank remained stable.

Shares of Bank of America were basically unchanged at 2 p.m. EST Tuesday

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Bank of America Corporation Stock Quote
Bank of America Corporation
BAC
$36.67 (2.32%) $0.83

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
332%
 
S&P 500 Returns
118%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.