Bank of America beats by $0.03, beats on revs
Reports Q4 (Dec) earnings of $0.29 per share, $0.03 better than the Capital IQ Consensus Estimate of $0.26; revenues rose 14.9% year/year to $21.7 bln vs the $21.17 bln consensus. Revenue, net of interest expense, on an FTE basis rose $2.8 billion from the fourth quarter of 2012 to $21.7 billion. Excluding the impact of debit valuation adjustments (DVA) and fair value option (FVO) adjustments, revenue was $22.3 billion in the fourth quarter of 2013, compared to $19.6 billion in the fourth quarter of 2012.
Consumer Real Estate Services reported a net loss of $1.1 billion for the fourth quarter of 2013, compared to a net loss of $3.7 billion for the same period in 2012. The year-ago quarter included the settlements with the Federal National Mortgage Association (Fannie Mae) to resolve outstanding and potential repurchase and certain other claims and $1.1 billion of expense related to the IFR acceleration agreement. Revenue increased $1.2 billion from the fourth quarter of 2012 to $1.7 billion due to a $2.9 billion reduction in representations and warranties provision, partially offset by a $1.1 billion decline in servicing revenue reflecting lower Mortgage Servicing Rights (MSR) net-of-hedge performance and a smaller servicing portfolio, as well as a decline in core production revenue.
- Net interest income on a GAAP basis was $10.8 billion and $10.3 billion for the three months ended December 31, 2013 and 2012. Net interest income, on an FTE basis, rose 4 percent from the year-ago quarter to $11.0 billion. The improvement was driven by reductions in long-term debt balances and yields, favorable market-related adjustments from lower premium amortization, lower rates paid on deposits, and higher commercial loan balances. These factors were partially offset by lower consumer loan balances and lower asset yields.
- Net interest margin was 2.56 percent in the fourth quarter of 2013, compared to 2.35 percent in the fourth quarter of 2012.
- Noninterest income increased 28 percent from the year-ago quarter, to $10.7 billion, driven by lower representations and warranties provision and year-over-year improvement in both investment banking fees and investment and brokerage income.
- Noninterest expense was $17.3 billion, compared to $18.4 billion in the year-ago quarter, driven primarily by reduced expenses in Legacy Assets and Servicing (LAS) and lower personnel expense. This was partially offset by higher litigation expense reflecting continued evaluation of legacy exposures largely related to residential mortgage-backed securities (RMBS) litigation.
- Litigation expense rose to $2.3 billion in the fourth quarter of 2013 from $1.1 billion in the third quarter of 2013 and $916 million in the fourth quarter of 2012. In addition, the year-ago quarter included a $1.1 billion expense related to the Independent Foreclosure Review (IFR) acceleration agreement.
Consumer Real Estate Services reported a net loss of $1.1 billion for the fourth quarter of 2013, compared to a net loss of $3.7 billion for the same period in 2012. The year-ago quarter included the settlements with the Federal National Mortgage Association (Fannie Mae) to resolve outstanding and potential repurchase and certain other claims and $1.1 billion of expense related to the IFR acceleration agreement. Revenue increased $1.2 billion from the fourth quarter of 2012 to $1.7 billion due to a $2.9 billion reduction in representations and warranties provision, partially offset by a $1.1 billion decline in servicing revenue reflecting lower Mortgage Servicing Rights (MSR) net-of-hedge performance and a smaller servicing portfolio, as well as a decline in core production revenue.
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CRES first-mortgage originations declined 46 percent in the fourth quarter of 2013 compared to the same period in 2012, reflecting a corresponding decline in the overall market demand for mortgages.
- Global Banking reported net income of $1.3 billion in the fourth quarter of 2013, down $125 million from the year-ago quarter, as an increase in revenue was more than offset by higher provision for credit losses as the company built reserves associated with loan growth. Net charge-offs declined to $7 million in the fourth quarter of 2013 from $132 million in the fourth quarter of 2012.Revenue of $4.3 billion was up 9 percent from the year-ago quarter, reflecting higher net interest income, driven by loan growth and higher Investment Banking fees.
- Global Corporate Banking revenue increased to $1.6 billion in the fourth quarter, up $125 million from the year-ago quarter, and Global Commercial Banking revenue increased $117 million to $1.8 billion.
- Global Banking investment banking fees, excluding self-led deals, increased $101 million from the year-ago quarter.
- Global Markets reported net income of $215 million in the fourth quarter of 2013, compared to $181 million in the year-ago quarter. Global Markets revenue increased $604 million, or 20 percent, from the year-ago quarter to $3.6 billion.
- Fixed Income, Currency and Commodities sales and trading revenue, excluding DVAG, was $2.1 billion in the fourth quarter of 2013, an increase of $292 million, or 16 percent, from the year-ago quarter, as stronger results in credit and mortgage products more than offset weakness in rates and commodities. Equities sales and trading revenue, excluding DVAG, was $904 million, an increase of $191 million, or 27 percent, from the year-ago quarter due to gains in market share, higher market volumes, and increased client financing balances. Noninterest expense increased to $3.3 billion from $2.6 billion in the year-ago quarter, primarily driven by expense associated with RMBS litigation.
- Based on the proposed increases to the U.S. supplementary leverage ratio minimum requirements, the company expects that as of December 31, 2013, the supplementary leverage ratio for Bank of America Corporation would be above the proposed required 5 percent minimum and the supplementary leverage ratios for the company's two primary bank subsidiaries, Bank of America, National Association and FIA Card Services, National Association, would be above the proposed 6 percent minimum.
- Tangible book value per share of common stock was $13.79 at December 31, 2013 compared to $13.36 at December 31, 2012. Book value per share was $20.71 at December 31, 2013 compared to $20.24 at December 31, 2012.