Bank of America Corp. once excited investors by pledging steep cost cuts by the end of this year. It still has a ways to go.
The lender showed promise on revenue growth, as net interest income jumped to the highest in more than five years and revenue from trading and investment banking both topped estimates. Now, analysts question whether it can leverage that by further cost cuts or if tax overhaul will reduce pressure on executives to stay lean.
Chief Executive Officer Brian Moynihan reiterated Wednesday that the bank can hit the $53 billion goal for annual expenses he set in 2016, even as it continues spending on technology and boosts shareholder payouts. While full-year costs fell less than 1 percent in 2017 to $54.7 billion, Moynihan said the bank is effectively at the target run-rate after progress throughout the year.
"The basic principle is to run a company relatively flat through continued investment and cost effectiveness," Moynihan said on a call with analysts after reporting fourth-quarter results. "We've still got a lot of room ahead of us."
BofA shares fell 2.6 percent to $30.43 at 10:41 a.m. in New York, the most intraday since November. The stock has gained 34 percent in the past year, outpacing the 24 percent advance of the KBW Bank Index.
Bank of America, which spent more than any U.S. rival to clean up operations after the financial crisis, will have to eliminate about $1.7 billion in expenses this year to meet its annual goal. Already, it's cut employees in 23 of the past 25 quarters, including 463 in the most recent period. But quarterly results posted Wednesday show it still has to find more savings — somewhere.
Last month's Republican-led tax overhaul will cut BofA's effective tax rate to 20 percent in 2018, Chief Financial Officer Paul Donofrio said on a call with reporters, which should help boost this year's earnings and potentially reduce shareholder pressure on costs. The Charlotte, North Carolina-based bank has paid roughly 29 percent in recent years.
The lender is still evaluating what it will do with benefits from the tax overhaul, Donofrio said. Moynihan said the bank might seek to modestly increase some investments, including in technology, while funneling most of the gains to its shareholders. The company last month announced a $1,000 bonus for about 145,000 employees.
"We will continue to have the same rigor around the way we run the company," Moynihan said. "Just because the tax rates are lower doesn't change how we're going to do it."
Tax Charge
