Bank of America tops profit expectations on trading boost, sees higher 2025 interest income

Bank of America’s BAC-N profit beat expectations on Thursday as its traders benefited from a flurry of activity in the fourth quarter while the lender predicted it would earn more interest income in 2025.

The earnings mirror those of rivals across Wall Street including JPMorgan JPM-N, Goldman Sachs GS-N, Wells Fargo WFC-N and Citigroup C-N, whose results were buoyed by stronger equity markets and investment banking.

“Every source of revenue increased, and we saw better than industry growth in deposits and loans,” CEO Brian Moynihan said. “This broad momentum sets up 2025 very well.”

The second-largest U.S. lender’s net income rose to $6.7-billion, or 82 cents per share. That compares with $3.1-billion, or 35 cents per share, a year earlier.

On an adjusted basis, BofA earned 82 cents per share in the fourth quarter, beating analysts’ expectation of 77 cents per share, according to estimates compiled by LSEG.

The bank’s shares rose 0.2 per cent in early trading.

BofA’s sales and trading revenue rose 10 per cent to $4.1-billion, and the division notched records for the fourth quarter and full year. Fixed income revenue rose 13 per cent because of improving performance in macro products and continued strength in credit while equities revenue climbed 6 per cent, fuelled by more client activity.

Equity markets rallied in the fourth quarter following the U.S. elections as investors bet on a more business-friendly environment under President-elect Donald Trump.

The S&P 500 stock index had a banner year, closing 23.3 per cent higher in 2024 after racking up 57 all-time closing highs.

BofA’s wealth and investment management division also benefited from surging equities, attracting more client money. Its revenue climbed 15 per cent to $6-billion, while client balances jumped 12 per cent to a record $4.3-trillion.

Meanwhile, Wall Street profits rebounded last year as mergers and acquisitions recovered from a decade-low in deal volumes in 2023.

Bankers anticipate a stronger 2025 for deal making, helped by Trump’s vow to implement pro-business policies.

BofA’s investment-banking fees jumped 44 per cent to $1.7-billion in the fourth quarter, compared with a year earlier, but overall net income for its global banking unit fell as its expenses rose for personnel and technology.

Across the industry, global investment-banking revenue jumped 26 per cent to $86.80-billion, led by a 33 per cent surge in North America, according to Dealogic data. BofA earned the third-highest revenue among banks globally.

BofA’s rivals also raked in higher fees from advising clients on deals and underwriting stock and debt offerings.

Investment-banking fees rose 49 per cent at JPMorgan, 24 per cent at Goldman Sachs, 59 per cent at Wells Fargo and 35 per cent at Citigroup.

BofA’s net interest income – the difference between what banks earn on loans and pay out for deposits – rose 3 per cent to $14.4-billion in the quarter, compared with a year earlier, driven mainly by market activity, fixed-rate asset repricing and loan growth.

The figure beat analysts’ mean forecast of $14.27-billion in the fourth quarter.

That marks the first time BofA has posted year-on-year NII growth since the third quarter of 2023.

“We believe at this point we can continue this trajectory” on NII, Chief Financial Officer Alastair Borthwick told reporters on a conference call. “The economy is performing well, our asset quality is healthy, the consumers are still spending.”

BofA expects NII of $14.5-billion to $14.6-billion in the first quarter, higher than analysts’ expectation of $14.36-billion. It expects NII to climb in the fourth quarter to a range of $15.5-billion to $15.7-billion.

“Clearly, the outlook for lending profitability is improving in 2025 from a combination of steeper yield curve, less pressure on deposit costs and expectations for modest loan growth,” said Stephen Biggar, banking analyst at Argus Research.

Higher interest rates had crimped NII in recent quarters as lenders shelled out more to hold onto customers’ deposits. Moynihan said last month he expects to see NII grow throughout 2025.

BofA’s NII is also expected to benefit from fixed-rate assets and securities portfolio repricing over time into higher-yielding assets.

A steeper yield curve is also positive for banks as they can borrow money at lower short-term rates and lend at higher long-term rates, bolstering their interest income.

BofA stock gained 30.5 per cent in 2024, underperforming rivals JPMorgan, Wells Fargo and Citigroup as well as the KBW Bank Index.

A U.S. bank regulator last month issued a regulatory punishment on Bank of America for shortcomings in its anti-money-laundering programs.

Borthwick said the bank has been working closely with the Office of the Comptroller of the Currency over the last year to improve know-your-customer, anti-money-laundering programs, but does not see much material financial impact from the punishment.