Jan 12 Reuters Bank of America39;s fourthquarter profit shrank as the lender took 3.7 billion in combined charges to refill a government deposit insurance fund and phase out a loan index.

Its net interest income NII the difference between what banks earn from loans and pay to depositors fell 5 to 13.9 billion as the company spent more to keep customer deposits and demand for loans stayed subdued amid high interest rates.

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.

The Federal Reserve is expected to cut interest rates this year after a rapid pace of tightening in 2023. While lower rates will pressure the interest that banks make off loans, it could mean less spent on deposits and more demand for borrowing.

BofA took a pretax 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 will also take a charge of about 1.6 billion in the fourth quarter as it phases out a Bloomberg interest rate benchmark used in some commercial loan contracts. That amount is expected to be recognized back into its interest income through 2026, BofA said.

The secondlargest U.S. lender posted net income of 3.1 billion, or 35 cents a share, for the three months ended Dec. 31. That…