Bank of America reports one of ‘best years ever’ while income at Wells Fargo and Citi falls
Bank of America, Wells Fargo and Citigroup all beat consensus estimates in their quarterly earnings reports, despite substantial falls in income at the latter two.
Bank of America had an excellent quarter, making 2022 “one of the best years ever for the bank”.
In the fourth quarter Bank of America’s net income increased slightly to $7.1bn from $7.0bn in the same period last year., beating Bloomberg consensus estimates of $6.6bn.
Bank of America’s Consumer Banking division saw “record” income of $3.6bn as higher interest rates boosted the bank’s net interest income and offset higher loss provisions.
This translated into an earnings per share of $0.85, higher than consensus estimates of $0.79.
Loss provisions rose to $1.1bn from a release of $0.5bn last year
Chair & CEO Brian Moynihan said: “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.”
Wells Fargo and Citi
Things were not so rosy at Wells Fargo, even if it managed to outperform analyst estimates.
The quarterly figures were impacted by regulatory fees, litigation costs which caused noninterest expense to rise to $16.2bn from $13.2bn last year.
In December the Consumer Financial Protection Bureau ordered Wells Fargo to pay $3.7bn – a $1.7bn fine on top of $2bn in customer redress – stemming from illegal activity which took place between 2011 and 2022.
As a result of these costs, net income more than halved to $2.9bn from $5.8bn last year leading to an earnings per share of $0.67, down from $1.38.
CEO Charlie Scharf commented: “Though the quarter was significantly impacted by previously disclosed operating losses, our underlying performance reflected the progress we are making to improve returns. Rising interest rates drove strong net interest income growth, credit losses have continued to increase slowly but credit quality remained strong, and we continue to make progress on our efficiency initiatives.”
Aside from the fines, Wells Fargo’s result displayed similar characteristics to Bank of America and JP Morgan, who also announced results today. Net interest income rose 45 per cent to $13.4bn from $9.3bn last year while noninterest income declined 46 per cent “driven by lower results in our affiliated venture capital and private equity businesses”.
Its loss provision stood at $957m compared to a $452m release last year.
Citigroup also beat analyst expectations, even as net income fell to $2.5bn in the three months ending December 31, down from $3.2bn last year. The bank’s earnings per share fell to $1.16 from $1.46.
The decrease was driven by a higher cost of credit with Citi setting aside $1.8bn in allowances for credit loss compared to a release of $0.5bn the year before.
Within sectors there was a particularly strong performance from its Fixed Income Markets division which delivered a 31 per cent increase in revenue, driven by higher interest rates.
Income in Personal Banking and Wealth Management plunged 93 per cent year-on-year to $114m from $1.6bn as it built its allowance for credit losses to $752m from a release of $869m in the same period last year.
It also issued a rosier outlook than expected, estimating that it will record revenue between $78 and $79bn compared to analyst estimates of $76bn.
Citi CEO Jane Fraser said the bank had made “significant progress” regarding its strategic plan to deliver “long-term value”.
JP Morgan also issued results today, beating analyst estimates but issued a more pessimistic than expected interest income guidance for 2023.