Bank of America's Quarterly Profit Rises 28%
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Bank of America Corp. profit rose 28% in the fourth quarter, boosted by record investment-banking revenue and recovering appetite for borrowing from businesses and consumers. The second-largest U.S. bank earned $7.01 billion, up from $5.47 billion a year earlier. Per-share earnings of 82 cents topped the 77 cents that analysts polled by FactSet had expected. Higher interest income and record investment banking revenue pushed Bank of America to higher earnings. The bank also reported an earnings slowdown a year ago, making this year's comparisons easier. Outstanding loans and leases totaled $979.12 billion in the fourth quarter, up 6% from both the third quarter and a year earlier. Other large banks saw their profits decline in the fourth quarter. Some of the business lines that powered banks over the past two years, like frenetic trading and a lucrative mortgage market, began to return to normal levels. Bank of America's revenue totaled $22.06 billion, up 10% from a year ago. Bank of America's 2021 compensation expenses rose 10% from a year earlier to $36.14 billion. Fourth-quarter net interest income, which includes money the bank makes on loans, rose 11% from a year earlier to $11.41 billion. The bank released $851 million it had set aside to cover pandemic loan losses. Big reserve releases padded profits in 2021, though Bank of America and its peers are nearing the end of that cycle. Investment banking fees increased 25% from a year earlier to $2.38 billion. Adjusted trading revenue was $2.93 billion, down 4% from a year earlier. JPMorgan Chase & Co., Citigroup Inc. and Goldman Sachs Group Inc. also reported gains in investment banking but declines in trading revenue. Bank of America shares rose 18 cents, or 0.4%, to $46.44. Morgan Stanley’s shares gained $1.72, or 1.8%, to $95.73, after profits equally topped forecasts.
The SMI lost just under 4 points to 12,526 on Wednesday. Among the 20 SMI stocks, there were ten price losers and ten price gainers. 37.43 (previously: 34.34) million shares were traded. Market participants spoke of very strong business figures regarding Richemont, the share rose by 5.1 per cent. In the third quarter to the end of December, the luxury goods group exceeded sales expectations by a good 10 per cent. In tow, Swatch climbed 2.6 per cent. Burberry, another European luxury goods company, had displayed strong financial results. "Luxury is on," said one trader. ABB (+1.4%) was upgraded by RBC analysts. Sika (+2.2%) benefited from a positive Jefferies commentary. Citigroup had upgraded Zurich (+0.2%) and downgraded Swiss Life (-2.9%). Adecco (+3%) was supported by a positive analyst comment. UBS had upgraded the stock to "buy" after the bank had previously advised selling. Among the second-line stocks, Poenina (+1.5%) and Burkhalter (+0.5%) rose. Both building services companies are exploring a possible merger. Orascom Development gained 1.7 per cent.
European stocks were higher Wednesday as investors continue to grapple with elevated bond yields and the likelihood of multiple interest-rate increases in the year ahead. The Stoxx Europe 600 index rose 0.2% to 480.9 points. In Paris, the CAC 40 and SBF 120 gained 0.6% and 0.5%, respectively. In Frankfurt, the DAX 40 gained 0.2% and the FTSE 100 gained 0.4% in London. French luxury stocks Kering (+2%), LVMH (+3.7%) and Hermès (+2.4%) were supported by encouraging news about the sector. UK-based Burberry (+6.3% in London) saw retail sales and same-store sales increase in the third quarter of its 2021-2022 financial year. M6 dropped 8.1% to 17.10 euros as Swilux, a company controlled by Belgian financier Albert Frère's Compagnie Nationale à Portefeuille SA (CNP), announced that it had sold its 5.05% stake in the audiovisual group. The sale of these shares was made at a unit price of 16.80 euros, while M6 shares closed at 18.60 euros on Tuesday. In its wake, TF1 fell by 7.4%. Semiconductor equipment maker ASML (-2.4% in Amsterdam) reported higher net profit and revenue in the fourth quarter. ASML also announced a dividend of EUR 5.50 per share for the 2021 financial year, up from EUR 2.75 per share the previous year. Microsoft's $75 billion deal to buy Activision Blizzard is positive for French videogames maker Ubisoft Entertainment, Citi said, a day after the company's shares jumped more than 10% on news of the deal. Ubisoft shares trade 3% higher.
U.S. stocks gave up early gains and turned lower, extending a recent stretch of losses that have pulled major indexes down to start the year. The technology-heavy Nasdaq Composite shed 166.64 points, or 1.1%, to 14340.26. It finished the day 10.7% below its all-time closing high, set in November. A decline of greater than 10% is considered a correction for a stock index. The S&P 500 fell 44.35 points, or 1%, to 4532.76. The Dow Jones Industrial Average lost 339.82 points, or 1%, to 35028.65. The moves in the bond market have rippled through stocks, and particularly the tech sector. The Nasdaq Composite is down 8% this year, a much sharper decline than the S&P or Dow industrials. U.S. Bancorp fell almost 8% after the bank holding company posted a rise in compensation costs. This earnings season, Goldman Sachs, JPMorgan Chase and Citigroup have also reported shelling out more in compensation. Procter & Gamble said consumers were undeterred by higher prices, leading to higher revenue and lifting shares of the consumer-goods company around 3.4%. Over the next week, investors will be parsing earnings from big tech companies including Netflix and Microsoft.
In Asia, major indexes broadly closed with gains. On the Tokyo Stock Exchange, which on Wednesday recorded by far the heaviest losses in the region, the Nikkei 225 index is now recovering by 1.1 percent. Hong Kong gains 2.3 percent. In contrast, the increase in Shanghai is limited to 0.3 percent. Country Garden improved in Hong Kong by 6.4 percent, Country Garden Services even by a good 15 percent. Longfor Group is up 3.9 percent. China Aoyuan is up 3.2 percent, although the company says it cannot make interest payments which were supposed to be due this month. The share price of reeling real estate giant China Evergrande is up 7.6 percent. Technology stocks are defying negative guidance from U.S. industry officials, who have been suffering for some time from the Federal Reserve's plans to raise interest rates. Meituan increase by 8.8, Alibaba by 4.8 and Tencent by 2.3 percent. AAC Technologies, on the other hand, slumps just over 10 percent; the company has warned of a drop in profits over the past year.
US Government-bond prices edged up Wednesday, pushing down yields. Yields on benchmark 10-year Treasury notes slipped to 1.826% from 1.866% Tuesday, which was their highest level since January 2020. Yields on interest-rate-sensitive two-year notes were down to 1.022% from 1.038% Tuesday. Europe’s most closely watched government-bond yield turned positive for the first time since 2019. The yield on 10-year German bund rose as high as 0.021% Wednesday after trading in negative territory for over 30 months.
Berenberg increases UBS target to CHF 20.50 (18.50) - Buy
Jefferies raises Santander target to EUR 3.50 (3.30) - Hold
Liberum lowers Air France-KLM target to EUR 2 (3) - Sell
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