Bank of America returns to profit

City A.M. Reporter
Bank of America Corp reported a fourth-quarter profit, reversing a year-earlier loss, boosted by one-time items and lower expenses for bad loans.

Under pressure to shore up its balance sheet, Bank of America sold assets and completed a stock swap during the quarter that boosted its capital levels. And in 2012, the bank said it was considering issuing $1bn (£647m) in common stock to certain employees in lieu of a portion of their year-end cash bonuses.

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That move would further pad the bank's capital levels, but would dilute existing shareholders and likely stir discontent among some bankers.

"Bank of America looks like it's making good progress on the capital build-up," said Derek Pilecki of Gator Capital Management in Tampa, Florida. "It's a work in progress with expense cuts continuing. They have to issue stock to make capital targets, but the dilution isn't overwhelming."

The second-largest US bank by assets said net income applicable to common shareholders was $1.58bn, or 15 cents per share, compared with a loss of $1.6bn, or 16 cents per share, a year earlier. Like other large banks, Bank of America reported a decline in investment banking and sales and trading revenue.

The bank set aside $2.9bn in the fourth quarter for loan losses, down from $5.1bn a year ago.

Bank of America, which is working to shed risky assets, said its total loans decreased to $926 billion from $932bn in the third quarter. In its corporate bank, Bank of America said average loans and leases increased 29 percent from the year-ago quarter to $107.5 billion with growth in both US and international commercial loans.

Big bank peers Wells Fargo & Co and JPMorgan Chase & Co, as well as some regional banks, reported loan growth in the fourth quarter, potentially boding well for the U.S. economy.

Sales and trading revenue in Bank of America's banking and markets unit increased to $1.9bn, excluding an accounting charge, from $1.1bn in the third quarter but was down from $2.4bn a year ago. Investment banking fees were flat from the third quarter at $1 billion but down from $1.6bn a year ago.

In December, Chief Executive Officer Brian Moynihan said the bank had seen better results in this business in the fourth quarter after a weak third quarter.