BofA Beats in Q4, Guides NII Growth for 2026

January 14, 2026 at 19:51 UTC

6 min read

BofA earnings beat visualization with Q4 results and NII growth guidance for 2026

Key Points

Bank of America’s Q4 2025 profit and revenue beat analyst estimates, led by net interest income and trading.
Equity trading delivered a record fourth quarter, while investment banking fees were comparatively soft.
Management forecasts 5%–7% net interest income growth in 2026 and higher operating leverage.
Despite strong results and bullish economic commentary, BofA shares fell sharply after the release.

Earnings Beat Driven by Lending and Markets

Bank of America reported stronger-than-expected fourth-quarter 2025 results on Wednesday, with net income rising 12% year over year to about $7.6 billion and earnings per share of $0.98, ahead of consensus estimates of $0.95–$0.96. Revenue net of interest expense increased roughly 7%–8% from a year earlier to $28.37–$28.4 billion, also topping forecasts. Net interest income (NII), a key profitability driver, climbed about 10% to $15.8–$15.9 billion on a fully taxable-equivalent basis, supported by loan and deposit growth, fixed‑rate asset repricing and improved deposit pricing. Net interest yield improved to about 2.08%–2.1%. Non‑interest income rose around 4%, helped by higher fees and commissions. Management said the bank finished the year “a bit stronger than we expected” on NII, and noted that total revenue growth outpaced expense growth, producing more than 300 basis points of operating leverage in the quarter.

Trading Strength Offsets Softer Investment Banking

Market-facing businesses were a major contributor to the quarter. Sales and trading, investment banking and asset management fees generated $10.4 billion of revenue, up 10% year over year in aggregate. Equity trading was a standout: revenue in that business jumped 23% to $2.02 billion, delivering Bank of America’s best fourth quarter ever for equities and beating analyst expectations of roughly $1.9 billion. Overall sales and trading revenue, excluding net DVA, rose 10% to about $4.5 billion, with fixed-income trading up 1% and equities leading the gains. Investment banking performance was more muted. One report cited global banking investment banking fees of $973 million, down 1% year over year, with equity underwriting income down 26%, relatively stable debt underwriting, and advisory fees up 5%. Another report put total dealmaking revenue at $1.67 billion, up 1% from a year earlier. While trading and advisory activity were solid, the softer underwriting backdrop weighed on sentiment, with some commentary linking pre‑market share weakness to the investment banking line.

Balance Sheet, Credit Quality and Capital Returns

Bank of America highlighted broad-based balance sheet growth and stable credit quality. Average loans reached about $1.17 trillion, up $90 billion or 8% year over year, driven by 12% commercial loan growth and 4% growth in consumer loans across cards, mortgages, auto and home equity. Average deposits increased nearly 3% year over year, with Global Banking deposits up 13% and Consumer Banking posting a third consecutive quarter of year‑over‑year growth. Total assets ended the quarter at $3.4 trillion, little changed from the prior quarter as securities and cash reductions funded loan growth. Asset quality metrics improved: net charge‑offs were $1.3 billion, down about $80 million sequentially and 12% year over year, with the net charge‑off ratio at 44 basis points, below the bank’s through‑the‑cycle view of 50–55 basis points. Provisions for credit losses fell 10% to $1.31 billion, and non‑performing loans and leases declined to 0.49% of total loans. The bank returned $8.4 billion of capital to shareholders in the quarter, including $2.1 billion in common dividends and $6.3 billion in share repurchases, reducing the average diluted share count by about 4%. Tangible book value per share rose to $28.73, up roughly 7.5%–9% year over year. The CET1 capital ratio stood at 11.4%, above regulatory minimums, after a modest reduction partly tied to an accounting change for tax‑related equity investments.

Costs, Technology Spending and Accounting Changes

Quarterly expenses were $17.4–$17.44 billion, up just under 4% year over year, as higher incentive compensation and brokerage clearing and exchange costs accompanied stronger revenue and trading activity. With revenue up about 7%–8%, the efficiency ratio improved to roughly 61%–61.5%, down from about 63% a year earlier, and management said efficiency improved by a “couple hundred basis points” on a comparable basis. Executives emphasized headcount discipline and productivity gains from digitalization and AI, noting that total employees remained in a tight range around 213,000 while the bank added client‑facing roles and reduced operational support positions. Technology spending is expected to rise 5%–7% this year, with total tech outlays described as roughly $13 billion plus more than $4 billion in initiatives. AI spending was characterized as several hundred million dollars across 15–20 projects, with management saying AI techniques have reduced coding effort by about 30%. During the quarter, the bank also changed its accounting method for tax‑related equity investments, recasting prior periods; executives said the change mainly reclassified income statement items and had an insignificant impact on net income, though it reduced CET1 capital by about $2.1 billion, an effect expected to unwind over time.

Outlook: NII Growth and Economic Views Amid Market Volatility

Looking ahead to 2026, Bank of America reiterated guidance for net interest income growth of 5%–7% versus 2025 on a fully tax‑equivalent basis, assuming an interest‑rate curve that includes two cuts in 2026. The bank expects NII to rise about 7% in the first quarter of 2026, even though that period includes two fewer days of interest accrual, and is targeting roughly 200 basis points of operating leverage for the year, with an effective tax rate around 20%. CEO Brian Moynihan said that with consumers and businesses “proving resilient,” and with regulatory, tax and trade policies coming into sharper focus, the bank expects further U.S. economic growth and is “bullish on the U.S. economy in 2026,” while acknowledging that “any number of risks continue.” CFO Alastair Borthwick similarly described consumers as resilient, citing 6% growth in debit and credit card spending and a decline in 90‑day credit card delinquencies to 1.27% from 1.35% a year earlier. Despite the earnings beat and positive guidance, Bank of America’s shares fell sharply on Wednesday, sliding roughly 4%–4.5% to near $52 in what was described as the stock’s worst selloff since a prior period of tariff‑related turmoil, even as sector indices also traded lower. At the same time, several analysts have recently raised or initiated positive ratings and higher price targets on the stock, citing solid earnings prospects, favorable repricing trends and durable tailwinds into 2026.

Key Takeaways

Bank of America’s quarter combined strong NII and record equity trading with disciplined cost control, improving its efficiency ratio and operating leverage.
Balance sheet growth in both commercial and consumer lending, alongside lower charge-offs and stable delinquencies, underpinned management’s constructive credit outlook.
The bank’s 2026 guidance centers on mid‑single‑digit to high‑single‑digit NII growth and further operating leverage, even as markets reacted negatively to the results in the near term.

References

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