Bank of America Corporation (NYSE: BAC) faced a challenging fourth quarter, missing earnings estimates by a substantial 34% with reported earnings of $0.35 per share. The company also marginally fell short of revenue expectations, reporting $21.96 billion, a 10% year-over-year decrease from $24.53 billion. Weighing on the top line was the bank’s net interest income (NII) which declined 5% to $13.95 billion, primarily due to higher deposit costs and lower deposit balances, which overshadowed increased asset yields.
The plunge in net income to $3.1 billion, over 50% lower than the previous year’s $7.1 billion, was exacerbated by a pretax charge of $1.6 billion linked to the transition from the London Interbank Offered Rate (LIBOR). Despite this setback, the bank showcased resilience, offsetting declines with robust trading and investment banking gains.
Notably, Bank of America navigated these headwinds with a 1% rise in trading revenue to $3.8 billion, driven by a 12% surge in equities revenue. In 2023, the bank successfully navigated the financial markets without incurring trading losses on any single day for the entire year. Additionally, a fourth-quarter uptick in dealmaking propelled investment banking fees to $1.1 billion, a 7% increase.
Technical
Bank of America’s share price recently experienced a notable shift in sentiment, marked by a departure from a descending channel pattern. Initially mired in a downtrend, the stock witnessed a resurgence, breaking through the 100-day moving average and breaching the descending channel.
The turning point emerged at $24.96 per share, where oversold conditions catalysed an upward shift and established a support level. A significant breakthrough occurred at the $32.85 per share resistance level, substantiated by robust volumes, affirming the strength of the uptrend. However, recent developments indicate a waning of the earlier bullish momentum, as declining upside volumes signalled potential downsides. The retracement back below the $32.85 level led to the creation of a fresh resistance at $34.69 per share.
Intermediate support materialised at the 23.60% Fibonacci Retracement level, hinting at a potential reversal. A retest of $34.69 per share is probable if this level proves robust. Conversely, a sustained reversal might find support around the 50% level, serving as a downside point of interest.
Summary
Bank of America faced a challenging Q4, missing earnings estimates by 34%. The $1.6 billion charge related to the LIBOR transition exacerbated a 50% plunge in net income. Despite this, Bank of America displayed resilience, leveraging trading and investment banking gains. Technical shifts in its share price underline the delicate interplay of market sentiment amid financial challenges. At present, the 23.60% Fibonacci level serves as a pivotal point of interest.
Sources: Bank Of America Corporation, Reuters, CNBC, TradingView
Piece Written By Nkosilathi Dube, Trive Financial Market Analyst
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