Bank of America (BofA) reported better than expected fourth-quarter profit on Wednesday as higher interest income and loan growth eclipsed declines in revenue from investment banking and bond trading.
The second-biggest US lender's results were underpinned by four interest rate hikes by the central bank in 2018 and a strong job market that kept bad loans in check and borrowing healthy.
The bank's shares rose 4 per cent to $27.72 in trading before the opening bell.
BofA, with its large deposit pool and rate-sensitive mortgage securities, relies heavily on higher interest rates to maximise profits.
Revenue rose in three of the lender's four main businesses. Global markets, which includes trading, recorded a fall in revenue as spikes in market volatility toward the end of the fourth quarter made investors wary of making big bets amid fears of global economic growth concerns.
Trading was weak across the board for banks in the fourth quarter. Rivals JPMorgan and Citigroup reported double-digit declines in bond trading revenue earlier this week, citing the market downturn in December and wider credit spreads.
BofA's adjusted sales and trading revenue fell 6 per cent, with a 15 per cent fall in bond trading revenue overshadowing an 11 per cent rise in equity trading.
The slump in bond trading was cushioned by rise in interest income and loan growth.
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Total net interest income - the difference between what a lender earns on loans and pays on deposits - rose 7.3 per cent to $12.3 billion. Average deposits rose nearly 2 per cent to $1.34 trillion from the preceding quarter.
While the US Federal Reserve's forecasts indicate two more rate hikes this year, traders of contracts tied to the central bank's policy are betting that the Fed will not deliver a single rate hike this year and will begin cutting rates next year.
Loans to consumers rose 4 per cent, while those to businesses rose 2 per cent.
Investment banking fees fell 5 per cent due to lower debt underwriting and advisory fees.
Non-interest expenses fell 1 percent to $13.13bn as chief executive Brian Moynihan streamlines the lender's sprawling operations. Two years ago, Mr Moynihan pledged to cut expenses to $53bn by the end of 2018 and stick to that level until 2020.
Net income applicable to common shareholders rose to $7.04bn, or 70 cents per share, in the fourth quarter ended December 31 from $2.08bn, or 20 cents per share, a year earlier, when it took a nearly $3bn charge related to changes in the US tax law.
Analysts on average were expecting the bank to earn 63 cents per share, according to IBES data from Refinitiv.
Revenue, net of interest expense, rose 11 per cent to $22.7bn.
MATCH INFO
Hoffenheim v Liverpool
Uefa Champions League play-off, first leg
Location: Rhein-Neckar-Arena, Sinsheim
Kick-off: Tuesday, 10.45pm (UAE)
Company%20Profile
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UAE currency: the story behind the money in your pockets
Armies of Sand
By Kenneth Pollack (Oxford University Press)
Kanguva
Director: Siva
Stars: Suriya, Bobby Deol, Disha Patani, Yogi Babu, Redin Kingsley
Why it pays to compare
A comparison of sending Dh20,000 from the UAE using two different routes at the same time - the first direct from a UAE bank to a bank in Germany, and the second from the same UAE bank via an online platform to Germany - found key differences in cost and speed. The transfers were both initiated on January 30.
Route 1: bank transfer
The UAE bank charged Dh152.25 for the Dh20,000 transfer. On top of that, their exchange rate margin added a difference of around Dh415, compared with the mid-market rate.
Total cost: Dh567.25 - around 2.9 per cent of the total amount
Total received: €4,670.30
Route 2: online platform
The UAE bank’s charge for sending Dh20,000 to a UK dirham-denominated account was Dh2.10. The exchange rate margin cost was Dh60, plus a Dh12 fee.
Total cost: Dh74.10, around 0.4 per cent of the transaction
Total received: €4,756
The UAE bank transfer was far quicker – around two to three working days, while the online platform took around four to five days, but was considerably cheaper. In the online platform transfer, the funds were also exposed to currency risk during the period it took for them to arrive.
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Wicked
Director: Jon M Chu
Stars: Cynthia Erivo, Ariana Grande, Jonathan Bailey
Some of Darwish's last words
"They see their tomorrows slipping out of their reach. And though it seems to them that everything outside this reality is heaven, yet they do not want to go to that heaven. They stay, because they are afflicted with hope." - Mahmoud Darwish, to attendees of the Palestine Festival of Literature, 2008
His life in brief: Born in a village near Galilee, he lived in exile for most of his life and started writing poetry after high school. He was arrested several times by Israel for what were deemed to be inciteful poems. Most of his work focused on the love and yearning for his homeland, and he was regarded the Palestinian poet of resistance. Over the course of his life, he published more than 30 poetry collections and books of prose, with his work translated into more than 20 languages. Many of his poems were set to music by Arab composers, most significantly Marcel Khalife. Darwish died on August 9, 2008 after undergoing heart surgery in the United States. He was later buried in Ramallah where a shrine was erected in his honour.
The specs
Engine: 3.6 V6
Transmission: 8-speed auto
Power: 295bhp
Torque: 353Nm
Price: Dh155,000
On sale: now
COMPANY%20PROFILE
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COMPANY PROFILE
Name: HyperSpace
Started: 2020
Founders: Alexander Heller, Rama Allen and Desi Gonzalez
Based: Dubai, UAE
Sector: Entertainment
Number of staff: 210
Investment raised: $75 million from investors including Galaxy Interactive, Riyadh Season, Sega Ventures and Apis Venture Partners
COMPANY PROFILE
Founders: Sebastian Stefan, Sebastian Morar and Claudia Pacurar
Based: Dubai, UAE
Founded: 2014
Number of employees: 36
Sector: Logistics
Raised: $2.5 million
Investors: DP World, Prime Venture Partners and family offices in Saudi Arabia and the UAE
Emirates exiles
Will Wilson is not the first player to have attained high-class representative honours after first learning to play rugby on the playing fields of UAE.
Jonny Macdonald
Abu Dhabi-born and raised, the current Jebel Ali Dragons assistant coach was selected to play for Scotland at the Hong Kong Sevens in 2011.
Jordan Onojaife
Having started rugby by chance when the Jumeirah College team were short of players, he later won the World Under 20 Championship with England.
Devante Onojaife
Followed older brother Jordan into England age-group rugby, as well as the pro game at Northampton Saints, but recently switched allegiance to Scotland.
UAE gold medallists:
Omar Al Suweidi (46kg), Khaled Al Shehhi (50kg), Khalifa Humaid Al Kaabi (60kg), Omar Al Fadhli (62kg), Mohammed Ali Al Suweidi (66kg), Omar Ahmed Al Hosani (73), all in the U18’s, and Khalid Eskandar Al Blooshi (56kg) in the U21s.
From Zero
Artist: Linkin Park
Label: Warner Records
Number of tracks: 11
Rating: 4/5
Singham Again
Director: Rohit Shetty
Stars: Ajay Devgn, Kareena Kapoor Khan, Ranveer Singh, Akshay Kumar, Tiger Shroff, Deepika Padukone
Rating: 3/5
