Earnings miss in Q4 drives Bank of America stock lower ahead of MLK holiday 

Bank of America stock, trading under the ticker BAC on the NYSE, declined by over 1% last Friday following a significant drop in quarterly profit compared to the previous year and revenue that fell short of estimates. 

In Q4 2023, Bank of America reported a net income decrease to $3.1 billion, or 35 cents per share, compared to $7.1 billion, or 85 cents per share, in the corresponding period the prior year. This figure includes one-time items related to a noncash pretax charge of about $1.6 billion tied to the global transition away from an index used to replace the London Interbank Offered Rate (LIBOR). The bank said that the impact would be reintegrated into its interest income in subsequent periods, primarily through 2026. 

The adjustment followed the discontinuation of the Bloomberg Short-Term Bank Yield Index, which Bank of America used for calculating rates on certain commercial loans. This move aligns with the U.S. Federal Reserve and other banking regulators' decision to phase out the use of LIBOR by mid-2023. 

Excluding these items, Bank of America’s earnings per share came in at 70 cents, ahead the 53 cents FactSet consensus — however, revenue declined by 10% to $22.0 billion, falling short of the $23.7 billion forecast quoted by FactSet. 

The Bank of America stock price closed at $32.80 a share (-1.06%) on Friday, reflecting a decrease of 35 cents. U.S. markets are closed on Monday due to the Martin Luther King holiday. 

Bank of America earnings: BofA misses revenue estimates on lower securities trading, lending income 

In a comment cited by MarketWatch, Edward Jones analyst James Shanahan noted that the bank missed revenue forecasts primarily due to lower-than-expected securities trading revenues and traditional lending income: 

“Strength in business and credit card lending contributed to modest loan growth during the quarter. However, lending profit margins declined, particularly within the global markets business.” 

The bank also incurred a Federal Deposit Insurance Corp. (FDIC) fee of $2.1 billion related to the failures of Silicon Valley Bank and Signature Bank last year. 

Net interest income dropped by 5% to $13.9 billion, driven by higher deposit costs and lower deposit balances. Noninterest income fell by $1.8 billion to $8.0 billion. 

The provision for loan losses increased by $12 million to $1.1 billion. Bank of America's average deposits rose 2% to $1.9 trillion, while average loans and leases saw a modest increase to $1.1 trillion. 

In terms of segments, the consumer banking division reported a net income of $2.8 billion, with a 4% decline in revenue to $10.3 billion. The global wealth and investment-management segment achieved a net income of $1 billion, with client balances rising 12% to $3.8 trillion. The global banking division posted a net income of $2.5 billion, with investment banking fees increasing by 7% to $1.1 billion. The global markets division reported a net income of $636 million, with sales and trading revenue rising 3% to $3.6 billion. 

Moody's Investors Service analyst Peter Nerby described Bank of America's earnings as "modest”, citing the impact of interest rate headwinds partially offset by strong organic growth and expense discipline.  

Over the last 12 months, the Bank of America share price has slid by 3.8% —in contrast to the benchmark S&P 500 index, which has gained 20%. 

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