Bank of America posted fourth-quarter results on Wednesday that exceeded Wall Street expectations, driven by decreasing expenses in its mortgage business. Earnings rose to $3.4 billion, or 29 cents a share, from $732 million, or 3 cents a share, in the period a year earlier, Michael Corkery reports in DealBook. Earnings exceeded the 26 cents a share that analysts had expected. Net revenue rose 15 percent, to $21.7 billion.
“Capital and liquidity are at record levels, credit losses are at historic lows, our cost savings initiatives are on track and yielding significant savings, and our businesses are seeing good momentum,†said the bank’s chief financial officer, Bruce R. Thompson.
Bank of America’s earnings were driven by decreasing expenses in its mortgage business, signaling that the bank’s housing problems were continuing on the path to recovery.
On Tuesday, Wells Fargo reported fourth-quarter earnings of $5.6 billion, a 10 percent increase in earnings from the same period in 2012, even as the bank’s revenue from home loans showed signs of weakening, Peter Eavis writes in DealBook. The bank reported annual earnings of $21.9 billion, a 16 percent increase over its 2012 profit.
Wells Fargo’s annual earnings exceeded the $17.9 billion annual profit of JPMorgan Chase, which also reported earnings on Tuesday. JPMorgan has been weighed down by legal costs, resulting in a 7.3 percent slide in fourth-quarter earnings, Jessica Silver-Greenberg reports in DealBook. Legal costs totaled $1.1 billion in the quarter, shaving 27 cents a share from the bank’s earnings. The bank reported net earnings of $5.28 billion, or $1.30 a share.
Though JPMorgan and Wells Fargo experienced lackluster mortgage demand in the fourth quarter, they both reported that automobile lending increased. JPMorgan said auto loan origination rose 16 percent to $6.4 billion, and Wells Fargo reported a 26-percent increase year over year to $6.8 billion. But while auto lending is providing some relief to banks, it has also attracted increased regulatory scrutiny, Rachel Abrams writes in DealBook.
With the 2008 financial crisis still very much on their minds, banks remain reluctant to issue new mortgage loans, Mr. Eavis and Ms. Silver-Greenberg write in DealBook.
Though home prices continue to rise and the federal government is supporting the mortgage system, borrowers with less-than-pristine credit scores continue to be denied the American dream of home-ownership by the nation’s largest banks.
Wariness was in full view when JPMorgan and Wells Fargo reported their fourth-quarter results. Wells Fargo, the nation’s largest mortgage lender, reported granting $50 billion in mortgage loans, down 60 percent year over year. Similarly, JPMorgan said it extended $23 billion in mortgages in the quarter, down 55 percent from a year ago.
DOCTOR ADMITS SHARING DATA WITH FORMER SAC TRADER  | Another witness took the stand on Tuesday in the trial of Mathew Martoma, a former hedge fund manager at SAC Capital Advisors charged with insider trading. Prosecutors contend that the witness, Joel S. Ross, a prominent physician specializing in Alzheimer’s research, passed on confidential information to Mr. Martoma in what the government has called the most lucrative insider trading scheme in American history.
During his testimony, Dr. Ross told the jury of five men and seven women that Mr. Martoma “stood apart†for his knowledge on Alzheimer research, Alexandra Stevenson reports in DealBook.
Whether Mr. Martoma used confidential information to help SAC avoid losses and generate profits of $276 million is not the only question yet to be resolved. Mr. Martoma was expelled from Harvard Law School in 1999 for creating a false transcript, so it remains a mystery how he was then accepted into Stanford Business School, Matthew Goldstein writes in DealBook.
REGULATORS REVISE VOLCKER RULE  | Federal regulators gave in to the banking industry on Tuesday and announced they had revised a rule that would have required banks to take write-downs on a special type of collateralized-debt obligation, Matthew Goldstein reports in DealBook. The Volcker Rule approved by regulators in December would have required banks to shed their C.D.O.’s backed by trust-preferred securities, or TruPS, and recognize the losses, a rule that had caused an outcry in the banking community.
The new provision would apply to any bank that invested in C.D.O.’s backed by TruPS that were issued by banks with less than $15 billion in assets. The C.D.O.’s must also have been created before May 19, 2010, and a bank must have acquired them before Dec. 10, when the Volcker Rule was completed.
ON THE AGENDA Â |Â The Producer Price Index for December comes out at 8:30 a.m. Charles Evans, president of the Federal Reserve Bank of Chicago, gives a speech in Coralville, Iowa, at 12:50 p.m. Dennis P. Lockhart, the president of the Atlanta Fed, takes the stage in Atlanta at 5:20 p.m. to discuss the economy and monetary policy. Bank of America reports fourth-quarter earnings before the bell. The Senate holds a hearing at 2 p.m. on regulating financial holding companies and physical commodities. The House Committee on Financial Services holds a hearing at 10 a.m. to discuss the effect of the Volcker Rule on job creation. Robert H. Benmosche, the chief executive of A.I.G., is on Bloomberg TV at 9 a.m.
NEW BOOK BY MICHAEL LEWIS HITS SHELVES IN MARCH  | Michael Lewis, who wrote “Moneyball,†“Liar’s Poker†and “The Big Short,†is coming out with a new book, “Flash Boys,†on the financial world in March, The New York Times reports. With his publisher’s announcement, Twitter abounded with speculation as to the subject of his book. Many posts pointed to a message board, where it was suggested that the book would be about high-frequency trading.
Google Fans the Flame of Connectivity  | Google’s decision to pay $3.2 billion for Nest Labs will stoke enthusiasm for a future when everyday products and simple gadgets can all be controlled remotely, Robert Cyran of Reuters Breakingviews writes. DealBook »
Reserve Funds Bolster Banks’ Earnings  | The earnings that JPMorgan Chase and Wells Fargo reported on Tuesday appeared robust, but some of the banks’ profits came not from revenue, but from loan-loss reserves, which the banks set aside in cash during and after the financial crisis to cover future losses, Bloomberg Businessweek reports. BLOOMBERG BUSINESSWEEK
Chinese Firm Considers Bid for United Biscuits  | Hony Capital, a Chinese private equity firm with $6.8 billion under management, is looking into a bid for United Biscuits Holdings, the British maker of Digestives biscuits, Bloomberg News reports. BLOOMBERG NEWS
Forbes Catches International Eye  | Forbes Media, the company that includes its namesake magazine, is attracting interest from six different countries from across the globe, The Wall Street Journal writes. Forbes is owned by the Forbes family and the private equity firm Elevation Partners. WALL STREET JOURNAL
Firms Shift Focus to Operating Performance  | The private equity market is not as robust as it was 10 years ago, with firms posting lower returns and reduced fund fees, Forbes reports. As a result, firms are focusing on the operating performance of their existing portfolio companies, hiring individuals with operating expertise. FORBES
Japanese Company Backed by Cerberus Said to Plan I.P.O.  | The Japanese railroad and property company Seibu Holdings is said to be planning an initial public offering in Tokyo in the next few months, The Wall Street Journal writes, citing unidentified people familiar with the situation. The I.P.O. would end the company’s long dispute with its largest shareholder, the private equity firm Cerberus, over taking the company public. WALL STREET JOURNAL
Jakarta’s Blue Bird Taxis Looks to I.P.O.  | Blue Bird, whose taxis rumble through the streets of Jakarta, is planning to sell $400 million of its business in an initial public offering, giving the company a market capitalization of $2 billion, The Financial Times reports. FINANCIAL TIMES
Twitter Was Fourth-Largest I.P.O. in 2013 Â |Â Despite the hype, Twitter was only the fourth-largest initial public offering in 2013, Bloomberg News reports in a list. Plains GP Holdings, an oil pipeline holding company, topped the list, followed by Hilton Worldwide and Zoetis, a pharmaceuticals company. BLOOMBERG NEWS
Former Lululemon C.E.O. to Head Start-Up  | Christine Day, the former chief executive of Lululemon, who resigned seven months ago, will become the chief executive of a healthy food start-up called Luvo, Forbes reports. Luvo is a new venture from the investment banker Stephen Sidwell. FORBES
Supplier to Data Centers Raises $101 Million  | Nutanix, which supplies infrastructure products to data centers, has raised $101 million led by SAP Ventures and Riverwood Capital in its fourth round of venture capital funding, bringing its funding total to $172 million, ReCode reports. The investment values the company at $1 billion. RECODE
U.S. Marine Corps Offers Model for Start-Up Recruitment  | While most start-ups cannot afford to pay their employees competitive salaries, many still manage to recruit top talent by employing similar techniques as the United States Marine Corps and the Peace Corps, John Greathouse writes in The Wall Street Journal. WALL STREET JOURNAL
Deutsche Bank Suspends Traders Amid Foreign Exchange Investigations  | Deutsche Bank has suspended several traders in New York amid a series of investigations into potential manipulation of the $5-trillion-a-day foreign exchange market, according to a person briefed on the matter. DealBook »
Fed Considers Regulations on Commodities  | The Federal Reserve said it was evaluating regulations that would impose capital charges and insurance requirements on banks’ physical commodities trading, The Financial Times reports. Lawmakers and Wall Street opponents argue that banks that trade, warehouse and transport physical commodities pose a risk to the financial system. FINANCIAL TIMES
F.B.I. Suspects Traders of Front-Running Fannie and Freddie  | Wall Street traders may be manipulating the interest rate swap market, a derivatives market, to bolster their banks’ revenue by front-running transactions made by the United States mortgage giants Fannie Mae and Freddie Mac, Reuters reports. The disclosure came in an F.B.I. bulletin, which detailed the traders’ method of alerting each other of impending transactions so they could place orders first. REUTERS
New York Court to Hear Case on Foreign Bank Assets  | The New York Court of Appeals will decide whether banks operating in New York would have to turn over to litigants assets held in their foreign branches, Reuters reports. The ruling could have broad implications for the global banking industry. REUTERS
