Bank of America's 4Q Profits Soar as Mortgage Losses Tumble

Bank of America (NYSE:BAC) revealed surging fourth-quarter earnings on Wednesday that was fueled by fewer charges and less red ink in its mortgage business.

Shares of the No. 2 U.S. bank by assets rallied about 3% in the wake of the stronger-than-expected results.

BofA said it earned $3.44 billion last quarter, up from just $732 million the year before. On a per-share basis, the company logged a profit of 29 cents, compared with 3 cents the year before. Analysts had called for EPS of 26 cents.

The year-earlier period was dragged down by a massive $11.6 billion settlement with Fannie Mae.

Revenue increased 15% to $21.7 billion, topping the Street’s view of $21.24 billion.

“We are pleased to see the core businesses continue to perform well, serving our customers and clients," BofA CEO Brian Moynihan said in a statement. "While work remains on past issues, our 240,000 teammates continue to do a great job winning in the marketplace."

Driving the improvement in profits, BofA said its consumer real estate services division slashed net losses to $1.1 billion in the fourth quarter from $3.7 billion the year before.

In addition to the absence of the Fannie Mae litigation, provisions for credit losses plunged by $959 million to a benefit of $474 million as home prices increased. However, core mortgage production revenue fell to $403 million from $986 million amid lower volumes.

BofA reported a 36% jump in consumer and business banking net income to $2 billion thanks to lower provisions for credit losses and lower noninterest expenses. Provisions for credit losses tumbled by $651 million to $427 million as credit quality improved.

Global markets net income rose to $215 million last quarter from $181 million as revenue increased 20% to $3.6 billion. Fixed income-currency and commodities sales and trading revenue, excluding DVA, increased 16% to $2.1 billion despite weakness in rates and commodities.

In a sign of efforts to strengthen its balance sheet, BofA said its Tier 1 common capital ratio stood at 11.19% at the end of 2013, up from 11.08% at the end of September.

During a conference call with analysts, Bruce Thompson, BofA’s chief financial officer, revealed the bank has increased litigation reserves in the fourth quarter after receiving “additional information” related to residential mortgage securities.

Wall Street applauded BofA’s results, driving shares of the Charlotte-based lender 2.98% higher to $17.27 in premarket trading Wednesday morning. BofA had already rallied about 8% in 2014 through Tuesday’s close at $16.77.