Bank of America profit jumps on M&A boost, loan growth

[January 19, 2022]  (Reuters) - Bank of America Corp reported a jump in fourth-quarter profit on Wednesday, benefiting from loan growth and a frenetic pace of global dealmaking activity that helped drive its investment banking business.

After facing constant erosion to their income from loans due to rock-bottom interest rates, U.S. banks are expected to see the easing of some of that pressure as the Federal Reserve hints at raising rates later this year.

Bank of America, the second-largest U.S. bank by assets, will likely be one of the biggest beneficiaries of such a potential move, given its large loan and deposit book, as well as its huge exposure to rate-sensitive mortgage securities, compared with its Wall Street peers.

Net interest income (NII), a metric that measures the difference between the interest earned on loans and paid out on deposits, rose nearly 11% to $11.41 billion.

During the year, Bank of America rode the global M&A boom to post strong profit, as investment banking businesses closed record volumes of mergers, underwrote several initial public offerings and advised on deals involving special purpose acquisition companies.

The bank also released $851 million from its reserves for pandemic-related losses that did not materialize.

Shares of the company were up nearly 2% in premarket trade.

A recovery in consumer spending on credit and debit cards and a strong performance in the bank's trading and advisory business also helped bolster profit.

Combined spending on credit and debit cards grew 22% to $212 billion in the quarter, the bank said.

Average loans and leases, excluding those from the government-backed Paycheck Protection Program (PPP), grew 3.4% from the previous quarter and 3.2% from the year-earlier quarter.

For the quarter ended Dec. 31, the bank reported revenue, net of interest expense, of $22.1 billion, up 10% from last year.

Profit rose to $6.77 billion, or 82 cents per share, from $5.21 billion, or 59 cents per share, a year earlier.

Analysts on average had expected a profit of 76 cents per share, according to the IBES estimate from Refinitiv.

(Reporting by Niket Nishant, Noor Zainab Hussain and Manya Saini in Bengaluru and Elizabeth Dilts Marshall in New York; Editing by Anil D'Silva)

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