Bank of America (BoA) has ended 2022 on a strong note, growing earnings year over year in the fourth quarter in an increasingly slowing economic environment, according to Chair and CEO Brian Moynihan.
BoA’s highlights for the fourth quarter ended December 31, 2022 include Net Income of $7.1 Billion and EPS of $0.85.
The revenue grew 11% year-over-year led by 29% Improvement in Net Interest Income to $14.7 Billion.
In addition, the Bank delivered its sixth consecutive quarter of Operating Leverage.
Speaking on the Earnings Conference Call, Moynihan said: “We drove good organic customer activity and saw significant increases in net interest income, which all helped drive operating leverage.”
He added that this growth well exceeded the impacts of lower investment banking fees and the impact of bond and equity market valuations on asset management fees in their wealth management business.
The positive contributions of NII and sales and trading were also enough to overcome a decline in service charges driven by the fully implemented changes in NSF and overdraft fees in the consumer business, he said.
According to Moynihan, the themes in the quarter have been consistent all year as organic growth and rates helped deliver the value of the Bank’s deposit franchise.
“Our earnings of $27.5 billion for the year represent one of the best years ever for the bank, reflecting our long-term focus on client relationships and our responsible growth strategy,” he stressed.
While the year was strong, full year earnings declined as a result of loan loss reserve actions, he added.
In Global Markets, the Bank had its highest fourth quarter sales and trading performance on record growing 27% from last year ex-DVA, according Moynihan.
“This was led by a strong performance in our macro FICC businesses, where we made continuous investments in the past 18 months. Equities had a record Q4 performance as well,” he said.
Alastair Borthwick, Chief Financial Officer, said on the results call, that during the quarter, the balance sheet declined $23 billion to $3.05 trillion driven by modestly lower Global Markets balances.
The average liquidity portfolio declined in the quarter, reflecting the decrease in deposits and securities levels, but at $868 billion, it still remains $300 billion above the pre-pandemic levels. Shareholders’ equity increased $3.7 billion from the third quarter as earnings were only partially offset by capital we distributed to shareholders and roughly $700 million in redemption of some preferred securities.
The Bank continued investment in financial centers, according to Borthwick.
For the year, BoA opened 58 and renovated 784 more.
“Against all of that, both digital banking and operational excellence helped us to pay for investments, and that allowed us to improve the efficiency ratio to 47%, an impressive 600 basis point improvement over the year ago period,” he said.
“Our focus on responsible growth and solid client activity helped produce loan growth and increase net interest income by $3.3 billion versus the year-ago quarter, he said.
“We passed that along largely to the benefit of shareholders. Asset quality remained strong with loss rates increasing modestly off recent historic lows,” he said.
“Prudent management of capital in the quarter helped us to grow loans, buy back shares and increase our capital buffer on top of our regulatory requirements,” he added.
Looking forward to next quarter, Borthwick reminded that Q1 typically includes $400 million to $500 million in seasonally elevated payroll taxes.
He added that Q1 will also be the first quarter to include the costs of the late October announcement by regulators of higher FDIC insurance costs.
“As a result of holding the leadership share in U.S. retail deposits, that will add $125 million to each of our quarterly costs or a total of $500 million for the year. We expect these things will put expenses around $16 billion in the first quarter before expectations that they should trend back down again over the course of 2023,” he said.
Moynihan added: “We believe we are well positioned as we begin 2023 to deliver for our clients, shareholders and the communities we serve.”
