Bank of America hopes for loan growth bounce after muted quarter

Bank of America Corp posted a smaller-than-expected drop in fourth-quarter profit on Tuesday and said it was hopeful of achieving growth in loans this year as the economy recovers.

Loan portfolios have been quashed by the pandemic over the past year and the United States' second-largest bank reported a 2% fall in loans and 6% fall in credit card spending for the quarter.

Underscoring its confidence in the economy, the bank joined peers JPMorgan Chase & Co and Citigroup Inc in releasing $828 million from its reserves to cover bad loans after adding more than $8 billion through the first three quarters of the year.

Roughly 75% of the reserve release is tied to the bank's consumer portfolio as customers entered the new year in better-than-expected financial health due to fiscal stimulus. The commercial reserve release was mostly driven by a pull back from industries heavily impacted by the pandemic.

"We're grinding out of this health crisis," Chief Financial Officer Paul Donofrio said on a conference call with reporters. "We should be able to grow NII because we are adding deposits and we are adding loans."

Net interest income (NII) at the bank, a key measure of how much it can make from lending, tumbled 16%.

NII rose in the fourth quarter from a low-point in the third quarter and will continue to increase in 2021 with the biggest gains in the last half of the year, Donofrio said.

The second-largest U.S. bank by assets also reported a 13% fall in consumer banking revenue to $8.2 billion, citing a hit from lower interest rates.

Lower rates have limited how much banks can charge for their lending services at the same time fiscal stimulus programs and flagging consumer confidence have softened loan demand.

Shares of Bank of America fell 1.58% in trading before the bell.

Net income applicable to common shareholders fell to $5.21 billion, or 59 cents per share, for the quarter ended Dec. 31 from $6.75 billion, or 74 cents per share, a year earlier.

Analysts on average had expected a profit of 55 cents per share, according to the IBES estimate from Refinitiv, helped by lower credit costs.

The bank reported a 10% fall in overall revenue, net of interest expense, to $20.1 billion.

Revenue from its sales and trading business rose to $3 billion from $2.8 billion a year earlier.

Net income for its global markets unit jumped 38% to $791 million. Fixed income, currencies and commodities revenue fell 5% and came in below estimates, while the 30% jump in equities trading revenue impressed Wall Street.

Separately, the second-largest U.S. bank said its board approved a $3.2 billion share repurchase program in the first quarter.