Bank of America $5bn loan charges only partly offset by trading surge
Profits halve as lender joins peers in bracing itself for potential surge in bad debt
Bank of America set aside $5.1bn for loans losses in the second quarter, leading net income to halve to $3.5bn.
The bank joined the industry trend in offsetting the damage from the loan charges with a surge in trading revenues in the second quarter, as market volatility returned and companies rushed to issue new debt.
But the increase — fixed income trading rose some 50 per cent — was smaller than the boost enjoyed by its competitors.
Total revenues, at $22.3bn, were down slightly from the prior year, and ahead of analysts targets of $21.9bn. Earnings per share at $0.37 easily beat forecasts of $0.28. Net income fell 52 per cent from the previous year’s second quarter.
Despite the increase in reserves for future loan losses, current credit quality remained broadly stable: non-performing loans rose by less than four per cent from the year before.
Earlier this week, JPMorgan and Wells Fargo reported loan charges of $10.5bn and $9.5bn, respectively.
BofA shares have fallen by 30 per cent since the Covid-19 crisis first shook markets in February, broadly in line with the US banking sector. The shares were down a further 2 per cent in pre-market trading on Thursday.