Under Chief Executive Officer Brian Moynihan, the Charlotte-based lender has slashed costs while tightening risk controls, which has boosted profitability but also weighed on some of businesses like investment banking.
The second-biggest U.S. bank benefited from 4 percent growth in loans to consumers and 2 percent growth in loans to businesses in the fourth quarter, allowing it to capture more revenue from higher U.S. interest rates.
Revenue rose in three of the lender’s four main businesses. Global markets, which includes trading, recorded a fall in revenue during the turbulent quarter for markets that mirrored declines at rivals.
The bank’s shares jumped 5 percent to $27.94 in premarket trading on Wednesday.
BofA, with its large deposit pool and rate-sensitive mortgage securities, relies heavily on higher interest rates to maximize profits.
Its total net interest income, the difference between what a lender earns on loans and pays on deposits, rose 7.3 percent to $12.3 billion. Average deposits rose nearly 2 percent to $1.34 trillion from the preceding quarter.
Results were buoyed by four Federal Reserve interest rate hikes in 2018 and a U.S. strong job market that kept bad loans in check and borrowing healthy. The bank predicted economic growth would slow in 2019 but still remain strong.
Markets-related revenue fell as market turbulence pushed some customers to the sidelines, but a plunge in bond trading was cushioned by higher equity trading revenue. Fee income in the investment bank fell 5 percent because of lower debt underwriting and advisory fees.
Earlier in the week JPMorgan Chase & Co (JPM.N) missed profit estimates as its fixed-income trading revenue slumped. Citigroup Inc (C.N) likewise reported declines in bond trading, citing the market downturn in December and wider credit spreads.
BofA’s adjusted sales and trading revenue fell 6 percent, with a 15 percent fall in bond trading revenue overshadowing an 11 percent rise in equity trading.
While the Federal Reserve’s forecasts indicate two more rate hikes this year, traders of contracts tied to the central bank’s policy are betting that the Fed will not deliver a single rate hike this year and will begin cutting rates next year.
Non-interest expenses fell 1 percent to $13.13 billion as Moynihan works to streamline the lender’s sprawling operations. Two years ago he pledged to cut expenses to $53 billion by the end of 2018 and stick to that level until 2020.