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BofA’s retail bankers pick up slack for beleaguered bond traders

Bank of America’s consumer bankers saved the day for their bond-trading colleagues.

The company’s retail-banking business saw a 5% jump in loans in the fourth quarter and drove a record profit for the company, helping counter a slide in bond trading that’s been hurting all of Wall Street.

“We see a healthy consumer and business climate driving a solid economy,” Chief Executive Brian Moynihan said in a news release Wednesday. “Solid asset quality and loan and deposit growth drove this quarter’s results.”

Net interest margin climbed to 2.48% in the quarter, a bigger jump than analysts expected. Higher rates and improving loan growth have spurred Bank of America’s consumer business to a larger profit in each of the last three quarters, allowing the bank to weather a loss in share in its investment banking unit as it pulled back on risk.

The company’s sales and trading revenue for fixed income, currencies and commodities dropped 15% to $1.4 billion in the fourth quarter, falling short of a median analyst estimate of $1.6 billion. That follows declines in bond-trading revenue at JPMorgan Chase, which plunged to the lowest since the 2008 financial crisis, and Citigroup, which fell to a seven-year low. In equities, trading revenue rose 11 percent at Bank of America.

Bank stocks sank 18% last quarter as investors grew concerned about the potential for a U.S. recession and slowdown in global economic growth. That pessimism, alongside worries about trade tensions between the U.S. and China, triggered big price swings across equities, bonds and foreign exchange. While turbulence can sometimes spur banks’ market-making activities, so-called “bad volatility,” typified by extreme and short-lived price moves, kept wary clients on the sidelines.

Despite those headwinds, Bank of America’s consumer business continued to shine. Average deposits in that division grew 3 percent, while the unit’s net interest income rose 12%.

Fees from investment banking slipped 5% at $1.3 billion, beating a median estimate of $1.2 billion. Dealmakers are being sent out to rebuild market share after Charlotte, North Carolina-based Bank of America got “a little too careful,” Moynihan said last month.

Bank of America’s shares jumped 3.6% at 7:09 a.m. in early New York trading. They have declined 15 percent in the past year.

Other key results:

  • Net income tripled to $7.3 billion, or 70 cents a share, beating the 63-cent median estimate in a Bloomberg survey.

Last year’s fourth quarter included a charge related to U.S. tax reform.

  • Revenue climbed to $22.7 billion, exceeding the $22.4 billion analysts’ estimate.
Bloomberg News