BofA Surges On Solid Earnings Beat Despite Big FICC Miss, Jump In Credit Loss Provision

Following disappointing earnings from Citi and JPMorgan, which yesterday reported the first EPS miss in 15 consecutive quarters, the market breathed a sigh of relief when Bank of America reported strong top and bottom-line results, with revenue rising 6% Y/Y to $22.7BN, beating consensus estimates of $23.35BN, and resulting in stronger than expected Net Income of $7.3BN and EPS of 70 cents, up 49% Y/Y, and well above the 63 cent forecast.

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BofA performance, like Citi and JPM, has been a function of strong consumer banking income, which posted an impressive increase in 2018, even as Global Markets were generally flat for the full year...

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... largely the result of continued cost cuts across the business, which has seen its non-interest expense drop to the lowest this decade.

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Meanwhile, even as Net Interest Income continued to grow...

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... one can argue that the bank's strong bottom line performance has been mostly a function of aggressive stock repurchases.

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Going back to the 4th quarter, and looking at what did well, BofA is quick to note that it saw a 4% increase in total average deposits to a record high $1.345TN, driven by a 9% increase in Global Banking deposits.

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At the same time, and in keeping with the overall cost-cutting theme, total noninterest expense was flat in Q4 versus 3Q18, as the impact of :Shared Success" year-end bonus to associates as well as higher marketing spend offset lower FDIC expense. According to BofA, compared to 4Q18, 1Q19 expenses expected to include approximately $0.5B for seasonally elevated personnel costs.

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While not as impressive, average loans and leases also rose 1% Y/Y to $935BN, driven by a 5% increase in Consumer Banking loans despite a clearly slowdown in loan increases as shown below.

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