“Making Money” host Charles Payne said on “The Big Money Show” that this week's bank earnings will provide a glimpse of the stability of the U.S. economy.
Bank of America's fourth-quarter profit narrowed as the bank took a $3.7 billion levy to replenish the government's deposit insurance fund and phase out its lending index.
Net interest income (NII) – the difference between the income a bank earns from loans and the amount paid to depositors – increased as the company increased spending to maintain customer deposits and demand for loans was suppressed amid high interest rates. , down 5% to $13.9 billion.
After a windfall year in 2023, BofA expects NII to bottom out in the first half of this year and grow in the second half, CEO Brian Moynihan told investors last month.
The Fed is expected to tighten rates at a rapid pace in 2023 before cutting rates this year. Lower interest rates will put pressure on banks' interest on loans, while reducing spending on deposits and potentially increasing borrowing demand.
BofA will use the fourth quarter to pay a “special assessment” fee to replenish the Federal Deposit Insurance Corporation (FDIC) fund, which has been depleted by $16 billion to cover depositors at two failed banks in 2023. , collected $2.1 billion before taxes.
Bank of America also plans to incur about $1.6 billion in charges in the fourth quarter related to the phase-out of the Bloomberg interest rate benchmark used in some commercial loan agreements. This amount will be re-recognized as interest income through 2026, BofA said.
The second-largest U.S. financial institution posted net income of $3.1 billion, or 35 cents per share, for the three months ended Dec. 31. Net income for the same period last year was $7.1 billion, or 85 cents per share.
Bank of America also reported lower unrealized losses on securities held to maturity, supported by a rally in the bond market. The bank had unrealized losses of about $98 billion in the fourth quarter, down from $131.6 billion in paper losses in the third quarter.
“With our strong capital and liquidity levels, we are well-positioned to continue to grow responsibly in 2024,” said CEO Brian Moynihan.
