Bank of America profit falls as consumer banking business falters

[NEW YORK] Bank of America posted a drop in fourth-quarter profit on Tuesday as historically low interest rates hurt its consumer banking business.

Net income applicable to common shareholders fell to US$5.21 billion, or 59 cents per share, for the quarter ended Dec 31 from US$6.75 billion, or 74 cents per share, a year earlier.

Analysts on average had expected a profit of 55 cents per share, according to the IBES estimate from Refinitiv.

The second-largest US bank by assets, seen as an economic bellwether, reported a 13 per cent fall in consumer banking revenue to US$8.2 billion, citing lower rates and a fall in credit card activity. Net interest income at big US banks has come under pressure as the Federal Reserve cut interest rates to near zero to counter any signs of liquidity crunch during the pandemic.

Bank of America relies on higher interest rates to drive its profit growth as it has a large pool of deposits and rate-sensitive mortgage securities.

Separately, the second-largest US bank said its board approved a US$3.2 billion share repurchase programme in the first quarter after getting a green light from regulators to resume buybacks last month.

REUTERS