Bank of America (BoA) has ended 2021 on a strong note, producing a record year of $32bn in earnings and representing significant growth in net income over 2020.
BoA’s highlights for the fourth quarter ended December 31, 2021 include net income after tax of $7bn; EPS of $0.82, ending loan balances up $51bn to $979bn and ending deposit balances up $269bn to $2.1trn.
Speaking on the Earnings Conference Call, Chairman and CEO Brian Moynihan said that the Bank had strong organic and responsible growth across all their businesses.
“Fourth quarter represent the strongest quarter or organic long growth, we have experienced,” he stressed.
Moynihan said Investment Banking had its best year ever and Global Markets had its highest sales and trading revenue in a decade, led by record Equities performance.
“We grew revenue and produced positive operating leverage, we continue to see very strong asset quality metrics. We support our clients and our need for capital. And we made further progress in support of local community efforts across all our markets,” he added.
In Consumer, the Bank added millions of new credit card accounts and nearly a million net new checking accounts.
Wealth Management had record client flows and the strongest client acquisition numbers since before the pandemic, according to Moynihan.
He said that the Bank’s commitment to responsible growth remains well placed: “We are growing faster in the market in keeping credit costs in check.”
Alastair Borthwick, Chief Financial Officer, said on the results call that revenue, net of interest expense, of $22.1bn increased $2.0bn, or 10%. Improvement was driven by a $1.2bn increase in NII (Net interest income) and a little over $800m increase in noninterest income, driven by record asset management fees and record investment banking revenue.
“One important aspect of responsible growth has been to grow consistently and sustainably. I think we executed on that in 2021.” he said.
Q4 expenses were a bit higher than expected.
With regard to expenses Borthwick said: “Our revenue related costs increased, and we continue to make investments in our people and our capabilities to grow the franchise. At the same time, lower COVID costs and further digital engagement have helped to offset some of those increases.”
In the fourth quarter revenue growth outpaced expense growth on a year over year basis, which produced operating leverage of 400 basis points and a 19% year over year improvement in pre-tax pre-provision income to $7.3bn.
According to Borthwick, ROTCE was 15% and ROA was 88 basis points, both of which “improved nicely over the year”.
On NII expectations for 2022, Borthwick said: “We expect to see robust NII growth in 2022 compared to 2021. That assumes we see continued growth and the rising rates expectations embedded in the forward curve.”
He added that specifically in the first quarter of 2022, BoA expects two headwinds: “First, there are two less interest accrual days in the quarter. And as a reminder, we pick those back up in subsequent two quarters. Second, we expect less PPP fee benefits.”
Combined those two headwinds add to about $250m, he said: “Despite those headwinds, we would still expect Q1 to be up about a couple 100 million from Q4 and should grow nicely each subsequent quarter in 2022.
With regard to 2022 expenses, Borthwick said: We can hold expenses flat compared to 2021, which finished just below $60bn.”
He said this guidance incorporates expected continuing investments, strong revenue performance, and the inflationary cost experienced in the second half of 2021.
“It also relies upon our continued expense discipline, operational excellence improvements, and the benefits of digital transformation to deliver the operating leverage we seek,” he said.