REUTERS - Bank of America Corp reported a 46.8 percent rise in quarterly profit on Friday, kicking off what is expected to be a strong period for U.S. banks following an upswing in market activity in the wake of the U.S. presidential election.
Also helped by a sharp fall in expenses, net income attributable to shareholders of the No. 2 U.S. bank by assets rose to $4.34 billion in the three months ended Dec. 31 from $2.95 billion a year earlier. (http://bit.ly/2j7Aisq)
Earnings per share jumped to 40 cents from 27. Excluding items, the bank earned 42 cents per share, beating the average estimate of 38 cents, according to Thomson Reuters I/B/E/S.
Excluding an adjustment, total sales and trading revenue increased 11 percent in the quarter, spurred by a surge in activity in stock and bond markets following Donald Trump's surprise victory on Nov. 8.
BofA is the first big U.S. bank to report earnings since the Federal Reserve raised interest rates for only the second time since 2006 on Dec. 14.
"While the recent rise in interest rates came too late to impact the results, we expect to see a significant increase in net interest income in the first quarter of 2017," Chief Financial Officer Paul Donofrio said in a statement.
JPMorgan Chase & Co, the biggest U.S. bank, and Wells Fargo & Co, the biggest mortgage lender, report results later on Friday.
BofA's shares were little changed in premarket trading, having risen 34.8 percent since the election.
Total non-interest expenses fell 6.1 percent to $13.16 billion, bringing the total for the year to $54.95 billion.
Chief Executive Brian Moynihan, who has been criticized for being slow to cut costs, said in July that the bank would cut annual non-interest expenses to about $53 billion by 2018.
BofA said first-quarter expenses would be impacted by about $1.3 billion as a result of annual retirement-eligible incentive compensation costs.
BofA, considered the most interest-rate sensitive among the major U.S. banks due to its large stock of deposits and mortgage securities, said its net interest income rose 6.3 percent to $10.29 billion in the quarter.
Bank shares have rallied strongly since Trump's victory in anticipation that his policies will boost the economy as well as loosen regulations that have restrained banks in recent years.
Banks will also benefit if, as expected, the Fed raises interest rates three times this year. The Fed raised the key interest rate by 0.25 percentage points in December.
Excluding certain items, revenue from fixed-income and currency trading rose 12.2 percent to $1.96 billion, while equities trading revenue rose 7.5 percent to $948 million.
Total revenue, net of interest expense on a fully taxable equivalent basis rose 2.1 percent to $20.22 billion.
"Strong client activity and good expense discipline created solid operating leverage again this quarter," Donofrio said.
(Reporting by Sruthi Shankar in Bengaluru and Dan Freed in New York; Editing by Ted Kerr)
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