Banking

Bank of America earnings: 5 takeaways

Bank of America on Thursday reported fourth-quarter results that missed analyst expectations as its profit fell from the same quarter a year ago on slumping mortgage and trading business.

The Charlotte-based bank said it made $3.1 billion in the quarter, down 11 percent from a year ago, while its revenue declined. On a per-share basis, the bank had earnings of 25 cents, falling below analysts’ expectations of 31 cents.

The bank also said Thursday that it posted a profit of $4.8 billion for all of 2014, which was down 58 percent from 2013. It was less than Wells Fargo, the most profitable U.S. bank, made in just the fourth quarter. Bank of America’s earnings were hurt last year by high legal costs, including for a multi-billion dollar settlement it reached with the U.S. government and various states to resolve mortgage and other claims.

Here are five takeaways from the bank’s numbers:

1. STILL STRUGGLING TO GROW REVENUE: Bank of America reported tax-equivalent revenue of $18.9 billion in the fourth quarter, down 13 percent from the same period a year ago. Its revenue was dragged down by $1.2 billion in financial adjustments that lowered earnings by 7 cents a share.

Minus the adjustments, the bank’s revenue was still down from the same quarter a year ago – the fourth quarter in a row it has posted a year-over-year revenue decline.

The bank’s results in the quarter were negatively impacted by a drop in bond trading. JPMorgan Chase and Citigroup also this week reported declines in trading revenue as market volatility spiked in the quarter.

Bank of America’s revenue was also dragged down by a drop in its mortgage income, as the bank continues to see a slowdown in demand from borrowers to refinance.

Among positives, the bank posted higher revenue in its consumer and business banking segment, which saw a rise in average deposit balances. It also reported record asset-management fees in its global wealth and investment management segment.

CEO Brian Moynihan, speaking on a conference call Thursday with analysts, said that while there is “ongoing slow economic sluggishness,” the bank is “laser-focused” on gaining market share as the economy continues to improve.

2. BREAKUP TALK: Chief Financial Officer Bruce Thompson, during a conference call Thursday with reporters, fielded a question about whether breaking up Bank of America would be a good move for shareholders.

That question comes amid renewed talk on Wall Street about busting up big banks. A Goldman Sachs analyst this month wrote that JPMorgan could be worth more if it were broken up.

Thompson said Bank of America sees “a great deal of synergy” between its different businesses, adding: “We like the collection of businesses that we have at this point.”

3. HEADCOUNT STILL FALLING: Once again, Bank of America reported a drop in headcount from the previous quarter. The company’s total of full-time equivalent employees stood at 223,715 at the end of December, down 5,800 from September.

The bank, in a presentation, said the declines were across several businesses. Moynihan said Thursday that roughly 1,000 of the cuts were in its Legacy Assets and Servicing operation, which handles mortgages borrowers are struggling to pay.

The bank has reduced staffing in the unit as it lowers the amount of troubled loans it services. Many of those loans came from the bank’s 2008 acquisition of Countrywide Financial.

The bank now has about 64,000 fewer full-time equivalent employees than it did when Moynihan became CEO in 2010. Many jobs at the bank have been eliminated under “Project New BAC,” a cost-cutting program announced in 2011.

4. EXPENSES STILL HIGH: The bank has reduced its expenses through Project New BAC, whose goal of lowering costs by $2 billion per quarter was hit last year.

But the bank’s expenses remain high in Legacy Assets and Servicing. Thompson said the bank is seeking to lower quarterly costs in the unit, excluding litigation expenses, to $800 million by the end of this year, from $1.1 billion in the fourth quarter of 2014.

5. STOCK DOWN: The bank’s stock fell Thursday to $15.20, a drop of 5 percent, as weak bank results weighed on the stock market.

Since the start of the year, Bank of America shares are down 16 percent after closing as high as $18.13 in late December. The 24-company KBW Bank Index is down 11.6 percent.

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