Bank of America reported better-than-expected fourth-quarter earnings driven by higher interest rates

Autor: Financial Market
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Bank of America reported Q4-22 net income of $7.1 Billion or $0.85 per diluted share compared to $7.0 billion, or $0.82 per diluted share for Q4-21.

Revenue grew 11% to $24.5 billion led by 29% improvement in net interest income to $14.7 billion, and CET1 Ratio was 11.2%. Full-Year 2022 Net Income was $27.5 Billion and EPS of $3.19.

Q4-22 Financial Highlights

• Net interest income (NII) up $3.3 billion, or 29%, to $14.7 billion, driven by benefits from higher interest rates, including lower premium amortization expense, and solid loan growth
• Noninterest income of $9.9 billion declined $799 million, or 8%, as declines in investment banking and asset management fees as well as lower service charges more than offset higher sales and trading revenue
• Provision for credit losses of $1.1 billion increased $1.6 billion
• Net reserve build of $403 million vs. net reserve release of $851 million in Q4-21
• Net charge-offs of $689 million increased compared to prior year but remained well below pre-pandemic levels
• Noninterest expense increased $812 million, or 6%, to $15.5 billion driven by investments in the franchise across people and technology, partially offset by lower revenue related incentive compensation; operating leverage of 6%; efficiency ratio of 63%
• Average loan and lease balances up $94 billion, or 10%, to $1.0 trillion led by strong commercial loan growth as well as higher credit card balances
• Average deposits down $92 billion, or 5%, to $1.9 trillion; End of period balances relatively flat compared to Q3-22
• Average Global Liquidity Sources of $868 billion

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Bank of America returned $12 billion to shareholders in 2022 through common stock dividends and share repurchases throught the year.

We ended the year on a strong note growing earnings year over year in the 4th quarter in an increasingly slowing economic environment. The themes in the quarter have been consistent all year as organic growth and rates helped deliver the value of our deposit franchise.

That coupled with expense management helped drive operating leverage for the sixth consecutive quarter. 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.

We believe we are well positioned as we begin 2023 to deliver for our clients, shareholders and the communities we serve,” concluded Chair and CEO Brian Moynihan.