New York - Bank of America on Wednesday reported an eightfold increase in quarterly earnings on improving credit quality as it positions for a strengthening US economy.
The US banking giant reported fourth-quarter earnings of $3.2bn on revenues of $21.5bn, compared with earnings of $367m on revenues of $18.7bn in the year-ago period.
Those results translated into per-share income of 29 cents, above the 26c projected by analysts.
Operating expenses
Chief financial officer Bruce Thompson characterised 2013 as a year of progress after the company suffered badly in the 2008 financial crisis due to its heavy exposure to the housing bust.
"The foundation is there for us to grow and move the company forward," said Thompson.
Bank of America slashed its long-term debt in 2013, significantly reduced operating expenses and made progress on resolving lawsuits in the aftermath of the financial crisis.
However, like many of its peers, Bank of America still is not completely out of the woods on litigation related to the housing bust. It spent $2.3bn on litigation in the fourth quarter, up from $916m in the year-ago quarter.
Credit card balances
"We feel like we made great progress cleaning up some stuff and we still have additional work as we go into 2014," Thompson said.
Results were boosted by much lower provisions for credit losses than in the 2012 period. Bank of America booked just $336m in provisions for credit losses compared with $2.2bn in the 2012 quarter.
Thompson said consumers were paying off a much higher percentage of their credit card balances than in the past. Consumers were using the cards "more as a means to transact and do business as opposed to carry balances," he said.
"We continue to see a trend across the board where our consumers are managing their affairs on a more conservative basis."
Loan balances
In the consumer real estate segment, Bank of America reported a quarterly loss of $1.1bn compared with a loss of $3.7bn a year earlier. The 2012 fourth quarter was hit by a large settlements with the Federal National Mortgage Association, or Fannie Mae.
Earnings in consumer and business banking rose to $2.0bn thanks to better credit quality and higher average deposit balances. Earnings in this category were $1.4bn a year ago.
Bank of America also pointed to higher commercial loan balances and record global banking revenue.
Bank of America reported full-year earnings of $10.1bn compared with $2.8bn in 2012.
Shares were up 2.9% in pre-market trade.