Bank of America profit slumps on $2.9bn tax charge
Bank of America Corp's net profit nearly halved compared with a year earlier as it booked a $2.9bn charge stemming from the new federal tax law although it beat analysts' estimates when adjusted for the charge.
The lender joined other large U.S banks, including JPMorgan Chase & Co and Citigroup Inc, in reporting multi-billion dollar charges because the new law requires them to reassess their deferred tax assets and pay tax on profits kept abroad.
Excluding the tax charge, Bank of America earned $5.3bn, or 47 cents per share. According to Thomson Reuters I/B/E/S, excluding the tax charge and another item, the company earned 48 cents per share, topping analysts' estimate of 44 cents.
Revenue rose at three of the lender's four businesses, pushing total revenue up about 2pc to $20.69bn.
Like its rivals, Bank of America's trading revenue fell compared with a year earlier when investors actively changed positions around the U.S. presidential elections. At Bank of America, adjusted trading revenue fell 9 percent from this quarter last year.
Fourth-quarter results were also hit by a $292 million charge for single-name loss, which a source familiar with the situation said was related to troubled South African furniture retailer Steinhoff International.
The company's woes have rippled through Wall Street with Citigroup and JPMorgan booking losses of $130 million and $143 million, respectively, and more pain is expected when the European banks start reporting results in the coming weeks.
Bank of America's net interest income rose 11.4 percent to $11.46 billion as three rate hikes in 2017 helped it charge more on its loan.
The lender's large stock of deposits and rate-sensitive mortgage securities make the lender particularly responsive to a rise in interest rates.
Non-interest expenses fell 1 percent to $13.27 billion as the lender kept a tight leash on costs.
Net income, which includes the tax charge, fell to $2.37 billion, or 20 cents per share, in the quarter ended Dec. 31 from $4.54 billion, or 39 cents per share, in the year earlier period.
Bank of America's shares were up 0.4 percent at $31.35 in light premarket trading.