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Bank of America Profits Hit by Large Allowance for Loan Losses

By on March 9, 2021 0

Bank of America (BAC) – Get a report Wednesday revealed a grim snapshot of a first quarter that took its toll on its finances and forced it to pump up its war chest amid the worst market sell-off in generations.

The second lender after JPMorgan Chase (JPM) – Get a report posted provisions for credit losses of $ 4.8 billion, even more than some of its counterparts, as the coronavirus pandemic shut down the U.S. economy and hit the stock and bond markets.

The bank said it earned $ 4 billion, or 40 cents per share, compared to $ 7.3 billion, or 70 cents per share, during the same period a year ago. Analysts polled by FactSet had expected earnings per share of 49 cents. Revenue was $ 22.8 billion, according to analysts’ forecast of $ 22.7 billion.

“Despite increasing our loan loss reserves, we gained $ 4 billion this quarter, maintained a significant buffer against our more stringent capital requirements, and ended the quarter with more cash than at the start.” CEO Brian Moynihan said in a statement.

The numbers offer an ugly first glimpse of the impact of the coronavirus pandemic on America’s largest lenders. JPMorgan and Wells Fargo (WFC) – Get a report On Tuesday, not only profits significantly lower than last year’s figures, but also rising balance sheets, reflecting a rush for cash.

Wells Fargo has set aside some $ 4 billion in provisions for first quarter loan losses related to the Covid-19 pandemic and related economic fallout, nearly five times what it allocated a year ago and the most in a decade, leading to nearly 90% drop in bottom line.

In the personal banking segment, Bank of America said it earned $ 1.8 billion for the quarter, down $ 1.4 billion, or 45%, from a year ago, ” as strong customer activity was more than offset by an increase in loan loss reserves and the impact of lower interest rates. “

In its global wealth management and investment division, the bank earned $ 866 million, down $ 177 million, or 17%, mainly due to the bank’s reserve building linked to the Covid-19 and its impact on the balance sheet.

Across all lines of business, total customer balances declined 6% to $ 2.7 trillion, “due to declining stock market valuations at the end of the period,” the bank said. The flow of assets under management – money coming out of the bank’s vaults – was $ 7 billion from the fourth quarter of 2019 and $ 26 billion from the quarter a year earlier.

Shares of Bank of America fell 5.14% to $ 22.91 on Wednesday. The bank’s shares jumped more than 40% last year, topping the S&P 500’s 29% gain.

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