Bank of America earned $3.4 billion, or 29 cents a share, up from $732 million, or 3 cents a share, in the last three months of 2012. Analysts had projected 28 cents a share in profit. Revenue was $21.7 billion, up 15%, beating forecasts of $21.2 billion.
"They are not firing on all cylinders, but they're not misfiring on all cylinders any more," said Nancy Bush, an independent banking analyst. "They're about 75% of the way there. The other 25% will come with rising interest rates, the same as the rest of the industry.''
The most impressive profit gains came in the old Merrill Lynch investment banking and brokerage unit, Edward Jones analyst Shannon Stemm said.
Profit in global wealth and investment management climbed 35% from last year, the bank said. Investment banking fees hit a record $1.7 billion, up 9% from last year and 34% from 2013's third quarter.
On the downside, the average balance of total loans outstanding shrank in the commercial bank's global business and its consumer and business banking unit. That's because of weak demand, a trend other banks are also struggling with, Stemm said.
"Getting loan demand up would help a lot,'' Stemm said. The bank is making a push to increase its market share in areas such as credit card lending and mortgages to offset sluggish demand, she added.
The big numbers that drove the quarterly profit gain were the much smaller amount that the bank had to set aside for credit losses and its reduced legal expenses.
Bank of America reported pretax litigation expense of $2.3 billion, most of it related to fallout from mortgage lending before the 2008 financial crisis. However, even that number is still much lower than the $3.7 billion loss the company's mortgage business reported in! the same quarter last year, when it reached a $10 billion settlement with Fannie Mae over loans sold to the mortgage financing giant.
At the same time, the bank's provision for credit losses dropped by $1.9 billion to $336 million. The change reflects customers' better payment record and the rising value of homes used to secure mortgages.
The bank's profits will improve as rising rates let Bank of America and other banks increase the spread between what they pay for deposits and what they collect on loans and other assets. This difference, called the net interest margin, widened to 2.56% in the quarter, from 2.44% in the third quarter.
Investors are hoping that regulators will agree to let Bank of America raise its stock dividend in March, Stemm said. The company now pays just a penny per quarter on each share of stock.
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