Bank of America Corp’s quarterly profit topped analyst estimates yesterday as its growing loan book helped it ride out year-end market volatility.
Under chief executive officer Brian Moynihan, the Charlotte-based lender has slashed costs while tightening risk controls, which has boosted profitability but also weighed on some of businesses like investment banking.
The second-biggest US bank benefited from 4% growth in loans to consumers and 2% growth in loans to businesses in the fourth quarter, allowing it to capture more revenue from higher US interest rates.
Revenue rose in three of the lender’s four main businesses. Global markets, which includes trading, recorded a fall in revenue during the turbulent quarter for markets that mirrored declines at rivals.
BofA, with its large deposit pool and rate-sensitive mortgage securities, relies heavily on higher interest rates to maximise profits.
Its total net interest income, the difference between what a lender earns on loans and pays on deposits, rose 7.3% to $12.3bn. Average deposits rose nearly 2% to $1.34tn from the preceding quarter.
Results were buoyed by four Federal Reserve interest rate hikes in 2018 and a US strong job market that kept bad loans in check and borrowing healthy. The bank predicted economic growth would slow in 2019 but still remain strong. Markets-related revenue fell as market turbulence pushed some customers to the sidelines, but a plunge in bond trading was cushioned by higher equity trading revenue. Fee income in the investment bank fell 5% because of lower debt underwriting and advisory fees.
BofA’s adjusted sales and trading revenue fell 6%, with a 15% fall in bond trading revenue overshadowing an 11% rise in equity trading.
Non-interest expenses fell 1% to $13.13bn as Moynihan works to streamline the lender’s sprawling operations. Two years ago he 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 Dec. 31 from $2.08bn, or 20 cents per share, a year earlier, when it took a nearly $3bn charge related to changes in US tax law.
Revenue, net of interest expense, rose 11% to $22.7bn. 


BNY Mellon
Bank of New York Mellon Corp beat Wall Street estimates for fourth-quarter profit yesterday, as it earned more in fees from servicing assets that clients keep with the bank and kept a tight lid on expenses.
A 10% rise in total fee revenue to $3.15bn lifted overall revenue by 7.5% to $4bn.
Net income applicable to common shareholders fell to $832mn, or 84 cents per share, in the quarter ended December31, from $1.13bn, or $1.08 per share, a year earlier, when it took a one-time gain of $181mn due to US corporate tax cuts.
On an adjusted basis, the company earned $987mn or 99 cents per share. Analysts on average had expected earnings of 92 cents per share, according to IBES data from Refinitiv.
BNY Mellon expects first-quarter expenses to rise up to 2%, largely due to investments in improving technology, Chief Financial Officer Michael Santomassimo said in a call with analysts.
The bank also expects first-quarter investment management fees to be impacted by outflows in the fourth quarter of 2018.
BNY, as a custodian bank, gets most of its revenue from managing money of customers which include big banks and hedge funds, as well as managing investments for clients.
Non-interest expenses fell 1% to $2.99bn in the three months ended Dec.31


BlackRock
BlackRock Inc, the world’s largest asset manager, reported lower-than-expected quarterly profits yesterday, as price cuts and market turmoil overshadowed strong sales of relatively low-cost funds.
Sinking markets in late 2018 led investors to pull cash from the company’s typically higher fee actively managed funds even as they delivered record cash to the company’s relatively low-cost exchange traded funds (ETFs).
Overall, the company sold $43.6bn in stock, bond and other long-term investment funds, more than the $10.6bn sold the quarter prior.
But market declines and the company’s own price cuts took a bite out of the fees the company earns as a percentage of assets under management. Fees the company collects for hitting certain performance targets and lending out shares to people betting against stocks were also lower than the year prior. Assets under management were just under $6tn, down from $6.44tn in the preceding quarter.
Net income attributable to BlackRock fell to $927mn, or $5.78 per share, in the quarter ended December 31, from $2.30bn, or $14.01 per share, a year earlier, when it took a one-time gain due to US corporate tax cuts.
Analysts on average expected BlackRock to report $6.27 per share, according to IBES data from Refinitiv.
Excluding the restructuring charges and other items, the company earned $6.08 per share, compared with $6.19 per share, a year ago.
BlackRock cut expenses, but not as fast as its revenues fell. The company last week announced cutting about 500 jobs, or 3% of its workforce and booked a $60mn restructuring charge.
Investors now face the prospect that what they saw as one of the few big growth stocks in the asset management business could report lower earnings per share this year.


United Airlines
United Airlines has reported a fourth-quarter profit that easily beat Wall Street forecasts, sending shares higher, as the No 3 US carrier scheduled more flights out of its hubs and won back customers after a series of public relations disasters.
Shares of United Continental Holdings Inc jumped 6% to $86.11 in extended trading, lifting the airline sector and investor confidence after the carrier reported a 5% rise in revenue per mile flown, a closely watched industry measurement.
That growth was at the top end of United’s forecast and outpaced growth reported by rival Delta Air Lines earlier on Tuesday.
Airline shares had fallen this month after both Delta and American Airlines Group Inc lowered estimates for fourth-quarter unit revenue, raising concerns about the industry’s ability to raise fares in an uncertain global economy.
Chicago-based United attributed its revenue growth to a strategy launched last January to expand its domestic network by adding flights and more options for connections through its seven main hubs, with a particular focus on Chicago, Denver and Houston.
Adjusted earnings per share rose to $2.41 from $1.99 a year earlier, topping analysts’ average forecast by 37 cents, according to IBES data from Refinitiv.
For 2019, United said it expects adjusted earnings of $10to $12per share.
United posted fourth-quarter net income of $462mn, or $1.70 per share, compared with a profit of $579mn, or $1.98 per share, a year ago.
The airline said it planned to boost its flight network by another 4% to 6% next year, and said it had placed orders for four Boeing 777-300ER aircraft and 24 737 MAX planes.
However, the ability of airlines to introduce new aircraft into their fleets is being hampered by a partial US government shutdown, which is delaying federal certification for new airplanes to fly commercially.


Goldman Sachs
Goldman Sachs topped analysts’ revenue estimates yesterday as strength in its equities desk and M&A advisory cushioned losses from bond trading, making it the only Wall Street bank so far to show growth in fourth-quarter trading revenue.
Heightened market volatility and widening credit spreads in the fourth quarter reduced bond revenue for JPMorgan Chase and Citigroup. But equity traders remained busy as investors changed positions in a choppy market.
Goldman, which is more sensitive to market fluctuations than its peers, said overall trading revenue rose 2% in the three months ended December. Equities trading revenue jumped 17% to $1.60bn, while bond trading revenue slid 18% to $822mn, far from its peak of more than $6bn.
Citi’s bond trading revenue fell 21%, JPMorgan saw a 16% fall, while Bank of America, which reported earlier in the day, posted a 15% drop.
Investment banking, a business Goldman is trying to bolster to lower its dependence on market sensitive trading, fell 5% to $2.04bn. Revenue in its financial advisory business surged 56%, boosted by higher fees from dealmaking. Revenue from equity and debt underwriting fell.
Goldman’s net earnings attributable to common shareholders reached $2.32bn, or $6.04 per share, in the quarter, compared with a loss of $2.14bn, or $5.51 per share, a year earlier.
Analysts were looking for a profit of $4.45 per share, according to IBES data from Refinitiv, although it was not clear if the numbers were comparable.
The year-ago results included a one-off charge related to a change in US tax laws.