Lower operating expenses and solid fixed income trading revenues drove Bank of America Corporation’s (BAC – Analyst Report) fourth-quarter 2015 earnings of 28 cents per share, which surpassed the Zacks Consensus Estimate by 3.7%. Further, the bottom line witnessed a 12% year-over-year improvement.

The quarterly results included 3 cents per share of reduction in NII for certain trust preferred securities and 3 cents per share of negative impact from U.K. tax law changes. Excluding these, the company earned 34 cents per share.

BofA’s shares jumped more than 2% in pre-market trading, which, we believe, depicted investors’ optimism regarding improvement in revenues and success of its cost-saving plan. Notably, the price reaction during the full trading session will provide a better idea about how investors accepted the results.

BofA’s success story was largely driven by ‘expense control’ and no legal expenses. Further, a rise in mortgage banking income, fixed income trading revenue and card fees supported the bottom line.

Reduced long-term debt, attributable to maturities and improved funding costs, also featured among the positives.

Further, overall performance of the company’s business segments, in terms of net income generation, was encouraging. All segments, other than Global Wealth and Investment Management, Legacy Assets and Servicing and Global Markets, witnessed year-over-year rise in net income.

However, weakness in equity trading income and investment banking fees were the undermining factors. Also, a rise in provision for loan losses added to the concerns.

Details

Net revenue amounted to $19.5 billion, up 4% from $18.7 billion recorded in the prior-year quarter. However, the top line missed the Zacks Consensus Estimate of $20.3 billion.

Net interest income, on a fully taxable-equivalent basis, improved 2% year over year to $10 billion. Further, net interest yield fell 2 basis points (bps) year over year to 2.16%.

Non-interest income grew 72% year over year to $9.7 billion.