Bank of America Corp’s fourth-quarter profit nearly halved as it booked a $2.9 billion charge stemming from the new federal tax law.
Other large US banks, including JPMorgan Chase & Co and Citigroup Inc, have also reported charges in their fourth-quarter results because the new law requires them to reassess their deferred tax assets and pay tax on profits kept abroad.
Excluding the tax charge, Bank of America earned $5.3 billion, or 47 cents per share.
According to Thomson Reuters I/B/E/S, excluding the tax charge and another item, the company earned 48 cents per share compared with the average estimate of 44 cents.
Total revenue, net of interest expense, rose about 2 per cent to $20.44 billion as gains in interest income helped offset the tax charge and decrease in fixed-income trading revenue.
Trading revenue was weak for US banks in the fourth quarter compared with a year earlier when investors actively changed positions around the US presidential elections. At Bank of America, adjusted trading revenue fell 9 per cent from this quarter last year.
The bank’s net interest income rose 11.4 per cent to $11.46 billion as rising interest rates helped it charge more on its loan.
The Federal Reserve increased the interest rates thrice in 2017 bringing the overnight funds rate to 1.25 per cent-1.50 per cent.
Bank of America’s large stock of deposits and rate-sensitive mortgage securities make the lender particularly responsive to a rise in interest rates.
The bank’s non-interest expenses fell 1 per cent to $13.27 billion.
The lender’s net income, which includes the tax charge, fell to $2.37 billion, or 20 cents per share, for the quarter ended Dec. 31 from $4.54 billion, or 39 cents per share, in the year earlier period.
Bank of America’s shares were up 0.4 per cent at $31.35 in light premarket trading.