What Triggered Rally: Bank of America Corp (NYSE: BAC) stock rose 6.4% on January 16th, 2019 (as of 10:23 am GMT-5; Source: Google finance) after the company’s profit doubled in the fourth quarter from a year earlier, when the second-largest U.S. bank took a big write-down related to passage of the 2017 tax law. Net income rose to $7.3 billion. The results were underpinned by four interest rate hikes by the central bank in 2018, and a strong job market that kept bad loans in check and borrowing healthy. For the full year, for example, the bank’s adjusted pretax profit rose 15% to $30.2 billion and the adjusted after-tax profit rose by 33% to $21.1 billion. BAC repurchased $20.1 billion in common stock and paid $5.4 billion in common dividends during 2018
Analyst Thumbs Up to Bank’s Performance: BAC in the fourth quarter of FY 18 has reported the adjusted earnings per share of 70 cents, beating the analysts’ estimates for the adjusted earnings per share of 63 cents, as per the Analysts polled by Refinitiv. The company had reported the adjusted revenue growth of 11 percent to $22.7 billion in the fourth quarter of FY 18. Revenue rose in three of the lender’s four main businesses. Global markets, which includes trading, recorded a fall in revenue as spikes in market volatility toward the end of the fourth quarter made investors wary of making big bets amid fears of global economic growth concerns. Total net interest income rose 7.3 percent to US$12.3 billion. Average deposits rose nearly 2 percent to US$1.34 trillion from the preceding quarter.
Segment Performance: Loans to consumers rose 4 percent, while those to businesses rose 2 percent. Average loan and lease balances in business segments rose $25 billion, or 3%, to $881 billion. Investment banking fees fell 5 percent due to lower debt underwriting and advisory fees. Non-interest expenses fell 1 percent to US$13.13 billion as Chief Executive Officer Brian Moynihan streamlines the lender’s sprawling operations. Two years ago, Moynihan pledged to cut expenses to US$53 billion by the end of 2018 and stick to that level until 2020. Nonperforming assets declined $1.5 billion to $5.2 billion, primarily driven by improvements in consumer.
Outlook: While the Federal Reserve’s forecasts indicate two more rate hikes this year, traders of contracts tied to the central bank’s policy are betting that the Fed will not deliver a single rate hike this year and will begin cutting rates next year.