Bank of America beat estimates. Income boosted by higher rates.

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Higher interest rates rose

Bank of America

earnings in the fourth quarter as the bank reported a modest increase in profit.

Bank of America (ticker: BAC ) reported revenue of $24.5 billion in the quarter, beating estimates of $24.2 billion and up 11% from the year-ago quarter. Profits, meanwhile, is maintained mostly stable to the tune of $7.1 billion, or 85 cents per share, which was slightly more than the $7 billion the bank earned last year. Analysts polled by FactSet had expected Bank of America to post earnings of 77 cents per share.

Among the big banks, Bank of America was the biggest beneficiary of the Federal Reserve’s rate hikes in 2022. Net interest income rose 29% to $14.7 billion in the quarter as the lender collected more high interest payments on the loans granted by him.

Higher interest rates come with upsides and downsides. While banks earn more interest on their loans, ultimately higher interest rates mean banks will have to pay higher interest to depositors.

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Bank of America also did a modest build of its own provisions for bad loans of $403 million, compared to a release of reserves of $851 million in the year-ago quarter. However, analysts at Deutsche Bank say they expect Bank of America’s accumulated reserves to be smaller than those of other companies during a potential downturn. Last month, Barron’s wrote favorably for Bank of America, noting that it has the highest quality loan portfolio in its peer group. In Friday’s release, Bank of America said net write-offs rose to $689 million from $362 million in the year-ago quarter, but levels were still well below pre-pandemic numbers, meaning customers were still healthy.

Bank of America CEO Brian Moynihan highlighted the bank’s performance in the face of a challenging environment for lenders.

“We ended the year on a strong note, growing earnings year-over-year in the fourth quarter in an increasingly slowing economic environment,” Moynihan said. “The themes in the quarter were consistent throughout the year, as organic growth and interest rates helped drive the value of our deposit franchise.”

Shares of Bank of America have fallen nearly 30% over the past 12 months, compared with the SPDR S&P Bank ETF (KBE), which fell 21% through Wednesday’s close.

JPMorgan Chase

(JPM),

Citigroup

(C) and

Wells Fargo

(WFC) too report the results on Friday. Morgan Stanley (MS) and

Goldman Sachs

(GS) share their results on Tuesday.

Write Carleton English at [email protected]