Bank of America reported a 48 percent decrease in profit for the last three months of 2017, as it took a hit from last month’s federal tax overhaul.
The Charlotte-based bank said Wednesday it earned $2.4 billion in the fourth quarter, or 20 cents a share, compared with $4.5 billion, or 39 cents a share, a year earlier. Revenue rose 2 percent to $20.4 billion.
But for all of last year, Bank of America posted a profit of $18 billion, including the impact from the tax legislation. That compared with $17.8 billion in 2016. It was also the bank’s best performance since $21.1 billion in 2006.
In a statement, CEO Brian Moynihan said the bank’s “responsible growth” strategy produced solid results in 2017. The bank gained market share across its businesses while managing credit, risk exposures and expenses, he said.
The new tax law, passed in December, is expected to lower Bank of America’s corporate taxes for years to come. But the bank disclosed last month that its profit for the fourth quarter would be reduced by billions of dollars because of a lower valuation of certain deferred tax assets. On Wednesday, the bank said it took a charge of $2.9 billion related to the legislation.
Speaking to reporters on a conference call, Chief Financial Officer Paul Donofrio said that although the tax law produced a negative impact in the quarter, the bank expects to benefit in the medium- to long-term from the bill’s reduction in the corporate tax rate – what companies pay on their profits. The bill “levels the playing field for America” by reducing a key barrier to investing here, he said.
Some other mega banks, in releasing fourth-quarter results this month, also took similar one-time charges that dented their profits. On Tuesday, New York-based Citigroup reported a $22 billion hit that dragged it to a net loss of $18.3 billion.
Companies create deferred tax assets during unprofitable years, such as during the financial crisis, but can use them in the future to offset their taxes. The assets are worth less now that legislation cuts the corporate tax rate from 35 percent to 21 percent.
Moynihan, who this month entered his ninth year as CEO, presides over a company whose financial picture has improved from the days when it faced mounting legal costs tied to the financial crisis. He’s also continued to wring out costs, including through exiting some businesses, to streamline a company that had ballooned from years of acquisitions.
Last year, Bank of America’s share price rose more than 34 percent, a better performance than its big-bank peers. The stock recently eclipsed $31 for the first time since October 2008, but it still trades far below its peak of more than $50 before the crisis.
Bank of America said its fourth-quarter results were also affected by a $292 million charge primarily driven from a non-U.S. source that the bank declined to name. Bloomberg, citing a person briefed on the matter, said the charge was tied to embattled South African retailer Steinhoff International Holdings NV. Bank of America joined other banks in suffering multimillion-dollar burns on their dealings linked to Steinhoff, Bloomberg reported.
Bank of America became the latest big U.S. bank to report results for the fourth quarter.
Last week, New York’s JPMorgan Chase said its profit fell 37 percent to $4.2 billion after accounting for charges related to the tax legislation.
Wells Fargo, based in San Francisco but with its biggest employment hub in Charlotte, reported $6.2 billion in profit, thanks in large part to the tax legislation. Wells Fargo said the legislation reduced its deferred income taxes, or taxes to be paid in the future.