Bank of America profit falls on US$3.7 billion in charges
BANK of America’s fourth-quarter profit shrank as the lender took US$3.7 billion in combined charges to refill a government deposit insurance fund and phase out a loan index.
The second-largest US lender posted net income of US$3.1 billion, or 35 US cents a share, for the three months ended Dec 31. That compares with US$7.1 billion, or 85 US cents a share, a year earlier.
Its net interest income (NII) – the difference between what banks earn from loans and pay to depositors – fell 5 per cent to US$13.9 billion as the company spent more to keep customer deposits while demand for loans stayed subdued amid high interest rates.
After a windfall year in 2023, the bank expects NII to dip to a trough in the first half of this year and grow in the second half, CEO Brian Moynihan told investors last month.
The Federal Reserve is expected to cut interest rates this year after a rapid pace of tightening in 2023. While lower rates will pressure the interest that banks make off loans, it could mean less spent on deposits and more demand for borrowing.
The bank took a pre-tax charge of US$2.1 billion in the fourth quarter to pay a “special assessment” fee to replenish a Federal Deposit Insurance Corporation (FDIC) fund that was drained by US$16 billion to cover depositors of two banks that collapsed in 2023.
Bank of America will also take a charge of about US$1.6 billion in the fourth quarter as it phases out a Bloomberg interest rate benchmark used in some commercial loan contracts. That amount is expected to be recognised back into its interest income through 2026, BofA said. REUTERS
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