Bank of America share price down, reports performance below expectations

Bank of America Corp, the second-largest US lender, announced on Thursday that its fourth-quarter profit fell, largely due to decline in revenue from fixed-income trading.

Net income for the three months ended December 31 slided to $3.1 billion, compared to a net income of $3.4 billion a year earlier. Earnings per share stood at $0.25, down from the $0.29 in 2013. In comparison, analysts projected earnings per share of $0.31 on a net income of $3.5 billion.

Revenue from fixed-income trading fell 26% to $1.5 billion, driven by declines in credits and mortgages due to lower client activity, the company said. BofA is the third large US lender to report its performance in the recent quarter, yesterday JPMorgan stated a 14% decline in fixed-income trading revenue.

“In 2014, we continued to invest in our businesses while reducing expenses and resolving our most significant litigation matters,” said Chief Executive Officer Brian Moynih.

BofA reduced expenses from $17.3 billion in the fourth quarter of 2013 to $14.2 billion in the recent three months, the lowest quarterly expense reported by the company since it merged with Merrill Lynch in 2008. Legal costs fell to $393 million, including the $250 million in fines related to foreign-exchange probes, which the company agreed to pay in November to the US Comptroller of the Currency.

Through the year BofA reduced it working force by 18 400 employees.

The companys results were also hit by three accounting adjustments, including a change in the treatment of its bond portfolio driven by lower long-term interest rates, a different valuation approach to its derivatives portfolio, and a charge associated with tighter BofA credit spreads. Combined, the adjustments reduced results by $1.2 billion.

Long-term interest rates also contributed to a decline in BofAs net interest income. The bank reported net interest income of $9.9 billion, down from the $11 billion stated last year.

“We continued our focus on optimizing the balance sheet this quarter, building capital and managing expenses in a challenging interest rate and geopolitical environment,” said Chief Financial Officer Bruce Thompson. “Credit quality remained strong, reflecting the improving economy and our solid risk underwriting.”

Bank of America Corp lost 2.49% on Wednesday and closed at $16.04 in New York. On Thursday the stock fell 2.93% to $15.56 at 15:00 GMT, marking a one-year decrease of 9.24%. The company is valued at $168.68 billion.

According to the Financial Times, the 26 analysts offering 12-month price targets for Bank of America Corp have a median target of $19.00, with a high estimate of $21.00 and a low estimate of $13.70. The median estimate represents a 18.45% increase from the last close price.