Bank of America Q4 2021 Earnings Report Recap

BAC beat on earnings and matched on revenue

Key Takeaways

  • Bank of America's net interest margin came in slightly below analyst estimates.
  • Net interest margin reflects the difference between the interest banks earn on their assets and the interest they pay out to depositors and other creditors.
  • Strong loan growth helped to boost net interest income despite the challenging interest rate environment.
Bank of America Earnings Results
Metric Beat/Miss/Match Reported Value Analysts' Prediction
EPS Beat $0.82 $0.76
Revenue Match $22.1B $22.1B
Net Interest Margin Miss 1.67%  1.68%

Source: Predictions based on analysts' consensus from Visible Alpha

Bank of America (BAC) Financial Results: Analysis

Bank of America Corporation (BAC) reported mixed Q4 FY 2021 earnings results. Earnings per share (EPS) surpassed analyst expectations, rising 39.0% year over year (YOY). Bank of America's quarterly revenue was in line with consensus estimates, rising 9.8% from the year-ago quarter. Net interest margin, which the bank refers to as net interest yield, came in just below analyst forecasts.

The company's shares rose 2% in pre-market trading. Over the past year, Bank of America's shares have provided a total return of 43.9%, well above the S&P 500's total return of 20.5%.

BAC Net Interest Margin

Bank of America's net interest margin for the fourth quarter was 1.67%, down on both a YOY basis and compared to the previous quarter. Net interest margin is a key metric that measures the difference between the income banks generate from credit products like loans and mortgages versus the interest they pay to depositors and other creditors. It is analogous to gross margin reported by non-financial companies, which is the difference between sales and cost of goods sold. In extremely low interest rate environments, net interest margins get squeezed as banks lower rates charged to borrowers in order to remain competitive but are reluctant to push rates they pay to creditors below the lower zero bound.

The Federal Reserve lowered interest rates in early 2020 in response to the economic shock triggered by the COVID-19 pandemic. Bank of America said that, despite the ongoing challenges from low interest rates, it was able to increase its net interest income by $1.2 billion compared to the year-ago quarter on strong loan and deposit growth. The Fed is expected to raise interest rates at least three times this year, which would help to boost the bank's net interest margin back toward pre-pandemic levels.

Bank of America also noted that net income was boosted by the release of $851 million of loan loss reserves. The bank built up its loan loss reserves early in the pandemic as a buffer against the possibility of defaults amid the economic shock. But defaults have generally not been as bad as feared, allowing the bank to release those reserves.

Bank of America Earnings Call Recap

“This quarter was a strong finish to a record year of profitability,” Alastair Borthwick, the bank's chief financial officer (CFO), said during a conference call with reporters after earnings were announced. “We had strong organic growth across our businesses in a growing economy.”

Bank of America's next earnings report (for Q1 FY 2022) is expected to be released on April 18, 2022.

Article Sources
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  6. The Wall Street Journal. "Fed Officials Project Three Interest Rate Rises in 2022 and Accelerate Stimulus Wind-Down." Accessed Jan. 19, 2022.

  7. CNBC. "Goldman p=Predicts the Fed Will Hike Rates Four Times This Year, More Than Previously Expected." Accessed Jan. 19, 2022.

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  9. Bloomberg. "BofA Gets Boost From Loans as Clients Start Borrowing Again." Accessed Jan. 19, 2022.

  10. Bank of America Corp. "Bank of America Announces 2022 Financial Reporting Dates." Accessed Jan. 19, 2022.

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