Bank of America posts $5.5 billion profit, frees money set aside for COVID defaults
Bank of America made a $5.5 billion profit in the fourth quarter, according to the bank’s Tuesday earnings report, a sign of resilience for the Charlotte-based bank and for Wall Street as banks broadly bucked the effects of the deadliest period of the COVID-19 pandemic.
Revenue in the fourth quarter was $20.1 billion, down from $22.3 billion for the same quarter last year for Bank of America.
Interests rates are still near zero, a move from federal policymakers intended to boost the economy, meaning that bank earnings are going to be constrained no matter the economic environment. Bucking the effect of interest rates, strong growth on the bank’s digital platforms and more fees coming from the bank’s dealmakers bolstered the quarter.
Bank of America also released $828 million it had set aside to handle potential losses on loans due to the pandemic. Much of that money was released due to an improving economic outlook. The bank had set aside over $8 billion in 2020 to prepare for bad loans.
“The latest stimulus package, continued progress on vaccines, and our talented teammates — who performed well helping their customers through this crisis — position us well as the recovery continues,” CEO Brian Moynihan said in a statement.
The bank’s shares were little changed in Tuesday trading.
Buyback restart
The bank, which employs 16,000 in Charlotte, is now going to restart buying up its own shares after the fourth quarter. CFO Paul Donofrio said in a statement that Bank of America will give its shareholders a total $4.8 billion, including dividends, in the first quarter of 2021.
The Federal Reserve had restricted banks from buying back their own shares for much of the pandemic, but that restriction was lifted late last year.
Tuesday’s earnings report came despite 35% to 40% of the bank’s branches being closed due to the pandemic, Donofrio said on a call with reporters. A larger share of customers are now doing more of their banking online, and only 14% of consumer deposits come in through the bank’s 4,312 branches. That figure was 21% for the last quarter of 2019.
Even the bank’s herd of Merrill Lynch money managers added clients during the pandemic. They grew their client base by 22,000 in the fourth quarter.
Overall for 2020, which saw millions of Americans lose their jobs, and even more afflicted by COVID, Bank of America thrived. The bank made $17.9 billion in profit, only down 35% from the pandemic-free year prior. It added $385 billion in assets for the year, roughly the size of one of a substantial regional bank.
“In summary, it was a good year,” Moynihan said on a call with analysts.
