Bank of America Corp. released its annual financial results Tuesday, showing that the largest North Carolina-based public company is past its recession-era woes and ready for a big bounce once interest rates increase. Investors were so impressed with the $16 billion in annual profit – the best showing in a decade — that shares declined 1.5%, with the company’s stock now trading at the lowest level since 2013.
Sadly for BofA shareholders, the bank still gets little respect because chances of higher rates have lessened due to the slumping stock market, depressed oil prices and China’s slowing economy. Until rates rise and BofA can boosts its net interest margin — the spread between what it pays on deposits and charges on loans — investors seem uninterested in bank shares.
Mixed in the annual filing were some interesting facts about the company, which employs more than 15,000 people in Charlotte:
- The bank has 13% fewer branches than it did in 2012. Total deposits have increased 8%.
- 15% of deposits are now made via mobile devices, reducing the need for bank offices.
- The bank has 11% fewer employees than a year ago — an 11,000-person reduction. About half of the reduction involved fewer people working out poorly performing mortgages.
- A lot of Wall Street analysts asked how BofA planned to cut more costs and staff — no surprise there. None of them live in Charlotte.
- CEO Brian Moynihan pledged to keep pressing on expenses. He said the bank paid $130 million in severance in the fourth quarter.
- The bank charged off a half of one percent of its loans last year. The charge off ratio has declined by two-thirds in four years, reflecting tighter credit standards and a better economy.
- Even so, total charge offs equaled $4.3 billion — a lot of bad debt by any measure.
- Total consumer deposits increased 15% over the past four years, to $809 billion. Low interest rates and all of the bad publicity afflicting BofA haven’t stopped people from dropping money into the bank’s vaults.
- BofA pays no interest on 79% of its business customers’ deposits, which total $308 billion.
- Credit card losses are running at record low levels, Moynihan said.
- If oil prices stay at $30 or less for nine straight quarters, BofA expects it would suffer $900 million in losses from loans to energy companies.
- But lower oil prices promises to bolster consumer spending, Moynihan said.
- Moynihan says BofA is targeting a 12% return on equity. During the years in which Hugh McColl and Ken Lewis ran the bank, a 15% ROE was a common target, but low interest rates have skewed that measurement.
- BofA’s shares fell 5.9% in 2015, and have declined 16% so far this year.