Tomahawk, WI 01/16/2014 (BasicsMedia) – Bank of America Corp (NYSE:BAC) on Wednesday released its fourth quarter results which showed impressive improvement in the bank’s performance. In fact, the bank believes 2013 delivered one of its best balance sheets in history. In the just released results, the bank noted improvements on loans and continued cost reduction.

Celebrating BAC’s big success in 2013 is important; however, more important is looking at where the future is taking the bank. The question should be about whether the bank will be reporting such success next.

As the second largest bank in the U.S., BAC is a closely watched business by investors all around the world.

Among the big four U.S. banks which include JPMorgan Chase (NYSE:JPM), Wells Fargo Co. (NYSE:WFC) and Citigroup (NYSE:C), Bank of America Corp (NYSE:BAC) was the most affected by legal settlements in 2013. Nonetheless, it was able end the year will big success.

Q4 earnings results

The bank exited Q4 with $3.44 billion in profit, representing $0.29 earnings per share. Analysts were looking for $0.26 earnings per share. On revenue side, BAC generated $22.32 billion, up from $19.6 billion in the corresponding quarter a year ago. Analysts had hoped that the bank would turn $21.2 billion in revenue.

Factors involved

As mentioned earlier, Bank of America Corp (NYSE:BAC) was able to boost its profit earning in Q4 due to improved loan condition. The risk of loan defaulting reduced, leading the bank to reduce the amount of money set aside to take care of bad loans. As a result, BAC only held $336 million against $2.2 billion it held last year in the same period. The difference in this amount was added to earnings which consequently boosted profits.

The company’s mortgage division also didn’t disappoint in Q4 as was widely expected. Improvement in mortgage division served to boost earnings in the quarter and the bank said it expects better performance in its housing loans segment.

It can been seen from the major banks that have reported their earnings that mortgage demand still remains an issue that is affecting business performance. The increase in home loan interest rates to 4.51 percent from 3.35 percent as of May 2013 has served to keep off customers applying for home loans and in the process lenders are experiencing a slowdown in this segment.

It is the same problem of mortgage originations that has impact the performance of Wells Fargo and JPM which although noted profits in Q4, felt the pinch in mortgage transactions.

Performance

Bank of America Corp (NYSE:BAC)’s coming to report gains in Q4 was supported by a widely improved business environment. The bank’s various businesses either experienced growth or remained flat in the quarter. One of the key businesses which showed rare success was customer and business banking which, being the bank’s largest operation, rose from $1.45 billion earning in Q4.12 to $1.97 billion in Q4.13.

Bottom line

Bank of America Corp (NYSE:BAC) is known to be undergoing reorganization in which the bank is cutting costs through slimming operations and reducing headcount. The bank is also reducing its location presence as it takes operations online and on mobile. So far Bank of America Corp (NYSE:BAC) has reduced its workforce to 242,100 as of the fourth quarter from about 267,200 over the same period in the previous year. These efforts are expected to continued boost profits.

Shares of Bank of America Corp (NYSE:BAC) have reacted positively to its Q4 gains, rising more than 2.2 percent in Wednesday trading. The stock has risen about 11 percent since the year began.

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