BofA's economic confidence: Bank of America experienced a decline in fourth-quarter profits due to $3.7 billion in one-time charges. Despite this, the Chief Financial Officer, Alastair Borthwick, expressed optimism about the US economic outlook, citing the Federal Reserve's decision to pause interest rate increases. Borthwick stated that the strong labour market provides consumers with significant economic strength.

Shares of the second-largest US lender dropped nearly 3 per cent in premarket trading as the bank reported a net income of $3.1 billion, or 35 cents per share, for the quarter ending December 31. This is a decrease from $7.1 billion, or 85 cents per share, during the same period the previous year. Adjusting for charges related to a fund for bank failures and the phasing out of an interest rate benchmark, the bank's profit was 70 cents per share, slightly surpassing estimates.

Bank of America managed to offset some declines with strong performance in trading and investment banking. Trading revenue increased by 1 per cent to $3.8 billion, driven by a 12 per cent rise in equities revenue. Additionally, investment banking fees saw a 7 per cent increase to $1.1 billion due to heightened dealmaking in the fourth quarter.

The bank reported a 5 per cent decrease in net interest income (NII) to $13.9 billion. CEO Brian Moynihan anticipates a dip in NII in the first half of the year, followed by growth in the second half, attributed to lower interest rates affecting income from loans. Loan growth is expected to be in the low to mid-single-digit percentage in 2024, following a 0.8 per cent expansion in the fourth quarter.

Bank of America incurred a pre-tax charge of $2.1 billion to replenish a Federal Deposit Insurance Corporation (FDIC) fund, and an additional charge of approximately $1.6 billion as it phases out a Bloomberg interest rate benchmark used in certain commercial loan contracts.

The bank also reported reduced unrealised losses on securities held until maturity, benefiting from a bond market rally. Net charge-offs, reflecting debts unlikely to be recovered, increased to $1.2 billion in the fourth quarter, with credit cards and office real estate contributing to the rise from $931 million in the third quarter.

(With Reuters Inputs)