BofA profit beats estimates as interest income hits record, trading surges

By Pritam Biswas and Saeed Azhar

Jan 14 (Reuters) – Bank of America beat estimates for fourth-quarter profit, as its traders capitalized on volatile markets, while it brought in record income from interest.

The bank expects net interest income (NII) — the difference between what it earns on loans and pays out on deposits — to rise 7% in the current quarter. It also reiterated a 5% to 7% NII growth forecast for the fiscal year 2026.

Softening U.S. labor demand, political gridlock and concerns over a potential AI-driven stock bubble rattled the stock markets in the fourth quarter, prompting investors to reshuffle their portfolios, while speculation about the Federal Reserve’s rate cuts further boosted trading.

Bank of America’s sales and trading revenue rose 10% to $4.5 billion in the quarter, in line with CEO Brian Moynihan’s forecast last month.  

“With consumers and businesses proving resilient, as well as the regulatory environment and tax and trade policies coming into sharper focus, we expect further economic growth in the year ahead,” Moynihan said in a statement.

“While any number of risks continue, we are bullish on the U.S. economy in 2026.”

The results capped a positive year for the bank. Its shares climbed over 25% in 2025, beating the broader S&P 500 index, but lagging rivals JPMorgan Chase and Wells Fargo. 

Shares of Bank of America fell nearly 3.2%. The broader markets were down in early trading on Wednesday.

“Banks have been very strong to start the year, and as these numbers come in, markets are taking a little time to digest,” said Jake Johnston, deputy chief investment officer at Advisors Asset Management.

“We’re seeing slight misses on some of the estimates, but these stocks had a strong run up into these reports, and it’s not unusual to see a little bit of a pullback.”

JPMorgan also reported a fourth-quarter profit on Tuesday that beat Wall Street estimates, helped by a stronger performance by its traders.

Volatile markets tend to benefit investment banks as their trading desks generate higher revenue from increased client activity. 

INTEREST INCOME FOCUS

U.S. banks have benefited from the repricing of fixed-rate assets and securities portfolios over time into higher-yielding assets.

   Additionally, the Federal Reserve’s rate cuts in late 2025 helped banks reduce deposit costs, allowing them to increase their earnings.

Lower interest rates also spur borrowing, as consumers want to take out more loans at attractive prices.

Average loans and leases at Bank of America rose 8% to $1.17 trillion from a year earlier, with growth seen across every segment of the business.

“We’ve seen growth in all of the consumer borrowing categories. So that’s helped us in the fourth quarter, but generally, the story in 2025 was more of a commercial borrowing story,” Chief Financial Officer Alastair Borthwick said on a media call.

The bank’s net interest income rose 9.7% to $15.75 billion in the quarter from a year earlier.

“We tend to look at Bank of America as the North Star to reconcile the health of the consumer, especially as the market has witnessed some cracks in the labor market,” said David Wagner, head of equities at Aptus Capital.

The bank’s strong report shows no signs “that the consumer is weakening whatsoever,” he said.

Bank of America expects mid-single-digit percentage loan growth in 2026, Borthwick said.

ASSET INFLOWS BOOST WEALTH UNIT

Strong markets lifted asset valuations and fueled healthy inflows into assets under management during the quarter for Bank of America.

Its global wealth and investment management unit posted revenue of $6.6 billion, up 10% from a year earlier, driven by higher asset management fees.

Net income for Bank of America rose to $7.6 billion, or 98 cents per share, in the three months ended December 31, from $6.8 billion, or 83 cents per share, a year earlier. 

Analysts were expecting a profit of 96 cents per share, according to estimates compiled by LSEG.

Revenue on a fully taxable equivalent basis came in at $28.5 billion, marginally above Wall Street’s consensus of $27.94 billion.

(Reporting by Pritam Biswas in Bengaluru and Saeed Azhar in New York; Additional reporting by Pranav Kashyap; Editing by Lananh Nguyen and Shinjini Ganguli)