Bank of America’s Global Markets business, which includes services such as prime brokerage and clearing, saw a $72 million net loss in the fourth quarter of 2014 but still ended the year far into the black at a gain of $2.7 billion net income, more than double that of 2013.
For the fourth quarter, the $72 million loss was steeper than the $47 million loss during the year-ago quarter. Revenue, net of interest expense, also decreased from $3.2 billion in Q4 2013 to $2.4 billion this past quarter.
These figures, says the bank, reflect lower sales and trading revenue, partly offset by less litigation expenses and smaller net Debt Valuation Adjustment (DVA) losses. The fourth quarter of 2014 also took a one-time transitional charge of $497 million for funding valuation adjustments on uncollateralized derivatives, adopting a methodology that “seeks to account for the value of funding costs today rather than accruing the cost over the life of the derivatives,” says the earnings report.
The bank as a whole also improved its capital ratios, going from having a 9.5% common equity tier 1 ratio in Q3 2014 to 10% this past quarter, both calculated under the fully phased-in Basel III rules.
Total revenue for the bank in the fourth quarter reached just under $19 billion, down from $21.7 billion in Q4 2013. Part of this decline was due to market-related adjustments, such as the acceleration of bond premium amortization on the company’s debt securities portfolio due to lower long-term interest rates, but also because of declines in sales and trading results as well as mortgage banking.
Bank of America Global Markets Sees Drop in Q4
Bank of America’s Global Markets business, which includes services such as prime brokerage and clearing, saw a $72 million net loss in the fourth quarter of 2014 but still ended the year far into the black at a gain of $2.7 billion net income, more than double that of 2013.