Bank of America today reported better-than-expected fourth-quarter profit as higher interest income and loan growth eclipsed declines in revenue from investment banking and bond trading.
The second-biggest US lender's results were underpinned by the US Federal Reserve's four rate hikes in 2018 and a strong job market that kept bad loans in check and borrowing healthy.
The US Fed has forecast two more rate hikes this year.
Bank of America relies heavily on higher interest rates to maximise profits as it has a large deposit pool and rate-sensitive mortgage securities.
It said today that loans to consumers rose 4% in the fourth quarter, while those to businesses rose 2%.
Total net interest income - the difference between what a lender earns on loans and pays on deposits - rose 7.3% to $12.3 billion. Average deposits rose nearly 2% to $1.34 trillion from the preceding quarter.
Adjusted sales and trading revenue fell 6% as a volatile market toward the end of 2018 made investors hesitant to make trades. Bond trading revenue fell 15%, overshadowing an 11% rise in equity trading.
Rivals JPMorgan Chase & Co and Citigroup earlier this week reported double-digit declines in bond trading revenue, citing the market downturn in December and wider credit spreads.
Bank of American said its net income applicable to common shareholders rose to $7.04 billion, or 70 cents per share, in the fourth quarter ended December 31.
This compares to $2.08 billion, or 20 cents per share, a year earlier, when it took a nearly $3 billion charge related to changes in the US tax law.
Analysts on average were expecting the bank to earn 63 cents per share, according to IBES data from Refinitiv.
The bank's revenue, net of interest expense, rose 11% to $22.7 billion in the three month period.
