The bank's finance chief, however, expressed optimism about the U.S. economic outlook, citing resiliency among consumers.
"We feel pretty good about the economy," Chief Financial Officer Alastair Borthwick said on a call with reporters.
"The consumers still have plenty of firepower" in a strong labor market, he said.
Shares of the second-largest U.S. lender were down 1.8% in early trading on Friday after it posted net income of $3.1 billion, or 35 cents a share, for the three months ended Dec. 31. That compares with $7.1 billion, or 85 cents a share, a year earlier.
Excluding two charges related to replenishing a fund for bank failures and how it indexed some trades, the bank reported a profit of 70 cents, slightly above LSEG estimates of 68 cents.
"Bank of America reported modest Q4 results as the impact of interest rate headwinds was only partially offset by strong organic growth and good expense discipline," said David Fanger, senior vice president at Moody's Investors Service.
Other analysts said Bank of America's net interest income underperformed that of rival JPMorgan (JPM.N), which posted a 19% rise to a record $24.2 billion.
"This wasn't a great quarter especially relative to peers - JPMorgan really set the stage on net interest income," said David Wagner, portfolio manager at Aptus Capital Advisors.
BofA's net interest income (NII) - the difference between what banks earn from loans and pay to depositors - fell 5% to $13.9 billion after a windfall year in 2023.
BofA expects NII to dip to a trough in the first half of this year and grow in the second half, CEO Brian Moynihan told investors last month, as lower rates push down the interest income that banks make off loans.
Loans are expected to grow at low- to mid-single-digit percentage rate in 2024, after expanding nearly 0.8% in the fourth quarter.
BofA managed to offset some declines with strong gains in trading and investment banking.
Trading revenue rose 1% to $3.8 billion in the fourth quarter, driven by a 12% jump in revenue from equities, while a pickup in dealmaking in the fourth quarter pushed up investment banking fees 7% to $1.1 billion.
BofA took a pre-tax charge of $2.1 billion in the fourth quarter to pay a "special assessment" fee to replenish a Federal Deposit Insurance Corporation (FDIC) fund that was drained by $16 billion to cover depositors of two banks that collapsed in 2023.
Bank of America also reported lower unrealized losses on securities held until maturity, helped by a rally in bond markets. The bank had unrealized losses of almost $98 billion in the fourth quarter, down from paper losses of $131.6 billion in the third quarter.
Net charge-offs, or debts that are unlikely to be recovered, rose to $1.2 billion in the fourth quarter from $931 million in the third quarter, mainly from credit cards and office real estate.
