Bank of America’s BAC fourth-quarter 2024 earnings of 82 cents per share surpassed the Zacks Consensus Estimate of 77 cents. The bottom line compared favorably with adjusted earnings of 70 cents in the prior-year quarter.
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Behind BAC’s Headline Numbers
Total investment banking (IB) fees (in the Global Banking division) of $985 million surged 43% year over year, driven by growth in underwriting income and advisory services revenues.
Similar to the previous quarters, Bank of America recorded an improvement in trading numbers in the fourth quarter. Sales and trading revenues (excluding net DVA) grew 10% to $4.13 billion. Fixed-income trading fees increased 13%, while equity trading income rose 6%. We had projected sales and trading revenues (excluding net DVA) of $4.11 billion.
These, along with net interest income (NII), were major revenue growth drivers for Bank of America. NII grew on a year-over-year basis, driven by relatively lower interest rates and improvement in loans and deposit balance. Management believes NII will keep growing this year.
On the other hand, provisions and adjusted non-interest expenses increased during the quarter.
The company’s net income applicable to common shareholders soared substantially from the prior-year quarter to $6.4 billion. Our estimate for the same was $6.06 billion.
BAC’s Revenues Improve, Adjusted Expenses Rise
Net revenues were $25.3 billion, which beat the Zacks Consensus Estimate of $25.13 billion. The top line also jumped 15% from the prior-year quarter.
NII (fully taxable-equivalent basis) grew 3% to $14.51 billion. Our estimate for NII was $14.40 billion. Net interest yield remained stable at 1.97%. We expected the metric to be 1.94%.
Non-interest income increased 37% to $10.99 billion. This was driven by higher total fees and commissions, and market making and similar activities. We had projected a non-interest income of $10.86 billion.
Non-interest expenses were $16.79 billion, down 5%. Excluding the FDIC special assessment of $2.1 billion, adjusted expenses rose 8%. Our estimate for non-interest expenses was $16.61 billion.
The efficiency ratio was 65.83%, down from 80.22% in the year-ago quarter. A fall in the efficiency ratio indicates an improvement in profitability.
Bank of America’s Credit Quality Worsens
Provision for credit losses was $1.45 billion, up 32% from the prior-year quarter. We estimated the metric to be $1.57 billion.
Net charge-offs (NCOs) jumped 23% to $1.47 billion. As of Dec. 31, 2024, non-performing loans and leases as a percentage of total loans were 0.55%, up 3 basis points.
BAC’s Capital Position Strong
Book value per share as of Dec. 31, 2024, was $35.79 compared with $33.34 a year ago. Tangible book value per share end was $26.58, up from $24.46.
At the end of December 2024, the common equity tier 1 capital ratio (advanced approach) was 13.5%, up from 13.4% as of Dec. 31, 2023.
BAC’s Share Repurchase Update
In the reported quarter, the company repurchased shares worth $3.5 billion.
Bank of America’s 2025 Guidance
For the first quarter of 2025, NII is projected to be between $14.5 billion and $14.6 billion. The metric is expected to grow sequentially to almost $15.5-$15.7 billion in the fourth quarter.
For 2025, non-interest expenses are expected to rise 2-3%. For the first quarter, the metric is anticipated to be approximately $17.6 billion and includes $0.6-$0.7 billion of seasonally elevated costs.
NCOs are expected to be between 50 bps and 60 bps for 2025.
Our Take on Bank of America
Bank of America’s focus on digitizing and expanding operations, decent loan growth and relatively lower interest rates are likely to keep supporting growth. However, elevated expenses and funding costs and a challenging operating backdrop pose major headwinds.
Bank of America Corporation Price, Consensus and EPS Surprise
Bank of America Corporation price-consensus-eps-surprise-chart | Bank of America Corporation Quote
Currently, BAC carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of BAC’s Peers
Wells Fargo’s WFC fourth-quarter 2024 adjusted earnings per share of $1.42 surpassed the Zacks Consensus Estimate of $1.34. In the prior-year quarter, the company reported earnings of $1.29.
Results benefited from higher non-interest income. An improvement in capital ratios and decline in provisions and non-interest expenses were other tailwinds. However, a fall in NII was the undermining factor for WFC.
Solid IB and trading performance drove JPMorgan’s JPM fourth-quarter 2024 earnings to $4.81 per share. The bottom line handily surpassed the Zacks Consensus Estimate of $4.03.
Robust capital markets performance, impressive mortgage banking performance and lower provisions majorly supported JPM’s quarterly performance. On the other hand, higher adjusted non-interest expenses and a decline in NII were the undermining factors.
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