B of A profit rises 43% on cost cuts, bond trading

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Bank of America, the second-largest U.S. lender by assets, said fourth-quarter profit rose 43% as revenue from fixed-income trading increased and expenses dropped.

Net income climbed to $4.7 billion, or 40 cents a share, from $3.28 billion, or 27 cents, a year earlier, the Charlotte, N.C., company said Friday in a news release. The average estimate of 29 analysts surveyed by Bloomberg was for adjusted profit of 38 cents a share.

Chief Executive Brian Moynihan has been cutting costs for years while contending with persistently low interest rates. That’s now paying off as Wall Street firms benefit from a rebound in fixed-income trading and the company moves beyond epic legal claims over mortgages that soured in the financial crisis. The bank last year set a target of $53 billion in annual expenses by the end of 2018, or about 8% less than 2015.

Fixed-income trading revenue climbed 12% to $1.96 billion, short of analysts’ $2.1 billion estimate. Equity trading rose 11% to $948 million, in line with estimates.

The lender revised earnings for recent years on Oct. 4 to reflect a change in the way it accounts for certain securities held in its investment portfolio. The move brings it in line with other Wall Street firms and may reduce swings in quarterly earnings, the bank said. The lender also dissolved a business segment created in 2011 to house delinquent mortgages.

Bank of America shares gained 35 percent since Nov. 8 -- the most among large U.S. lenders -- as Donald Trump’s election fueled investor expectations that financial firms would benefit from rising yields and relaxed regulation.

JPMorgan Chase and Wells Fargo are scheduled to report fourth-quarter results later Friday. Morgan Stanley is set to announce results on Tuesday, followed by Goldman Sachs Group Inc. and Citigroup on Wednesday.

Bloomberg News