Bank of America’s stock slides 1% as earnings almost halve from a year ago

The number includes one-time items that the bank flagged earlier this week, when it said it would book a noncash pretax charge of about $1.6 billion in its fourth-quarter report related to the global transition away from an index used to replace the London interbank offered rate, or Libor.

The bank said the impact would be added back to its interest income in subsequent periods, largely through 2026, according to a filing.

The accounting adjustment follows the discontinuation of the Bloomberg Short-Term Bank Yield Index, which Bank of America has been using as a way to calculate rates on some of its commercial loans.

It comes after the U.S. Federal Reserve and other banking regulators moved to end the use of Libor as of the middle of 2023.

Excluding those items, per-share earnings came to 70 cents, ahead of the 53 cent FactSet consensus, but revenue fell 10% to $22.0 billion, below the $23.7 billion FactSet consensus.

Bank of America’s stock price dropped by 35 cents to close at $32.80 a share.

Edward Jones analyst James Shanahan said Bank of America missed his revenue forecast, mostly because of lower-than-expected securities trading revenues and traditional lending income.

“Strength in business and credit card lending contributed to modest loan growth during the quarter,” he said. “However, lending profit margins
declined, particularly within the global markets business.”

Like all the major banks, Bank of America took a Federal Deposit Insurance Corp. fee of $2.1 billion, stemming from the failures of Silicon Valley Bank and Signature Bank last year. The fee is reimbursement for the billions the FDIC spent to provide coverage for uninsured deposits.

Net interest income fell 5% to $13.9 billion, as higher deposit costs and lower deposit balances more than offset higher asset yields. Noninterest income fell by $1.8 billion to $8.0 billion.

The bank said higher asset-management and investment-banking fees were more than offset by lower market-making and similar activities.

Provision for loan losses increased by $12 million to $1.1 billion. The bank’s average deposits rose 2% to $1.9 trillion, while average loans and leases were modestly higher at $1.1 trillion.

By segment, Bank of America’s consumer banking division had net income of $2.8 billion, as revenue fell 4% to $10.3 billion. The global wealth and investment-management segment had net income of $1 billion, with client balances rising 12% to $3.8 trillion, driven by higher market valuations and positive net client flows.

The global banking division had net income of $2.5 billion, with investment banking fees up 7% to $1.1 billion.

The global markets division had net income of $636 million, as sales and trading revenue rose 3% to $3.6 billion. Fixed income, currencies and commodities, or FICC income, fell 4% to $2.1 billion, while equities trading revenue rose 13% to $1.5 billion.

Moody’s Investors Service analyst Peter Nerby said Bank of America’s earnings were “modest” as the impact of interest rate headwinds was only partially offset by strong organic growth and expense discipline.

The stock has fallen 3.8% in the last 12 months, while the S&P 500
SPX,
+0.53%
has gained 20%.