Bank of America profit halves as bad debt charge mounts
Bank of America's second-quarter profit more than halved as the lender set aside $5.1bn (£4.1bn) for bad debts in preparation for the impact of the Covid-19 on the US economy.
Bank of America Corp.
$44.81
11:09 03/01/25
Net income fell to $3.5bn in the three months to the end of June from $7.3bn a year earlier as revenue shrank to $22.3bn from $23.1bn. Earnings per share fell to 37 cents from 74 cents, beating a consensus forecast of 26 cents a share.
Bank of America set aside $5.1bn for credit losses compared with 0.9bn a year earlier, taking 2020 provisions so far to $9.9bn. The second quarter charge was driven by a $4bn buildup of reserves, mainly in consumer banking, as the bank prepared for the impact of the worst recession since world war two.
Like other US banks such as Goldman Sachs and JP Morgan, Bank of America's markets business boomed, increasing net income by 81% to $1.9bn. But profit fell across its other divisions with consumer banking hit hardest.
Consumer banking net income plunged to just $71m from $3.3bn as low interest rates squeezed revenue, costs rose because of safety measures and credit loss provisions more than tripled to $3bn.
Chief Financial Officer Paul Donofrio said: "While net charge-offs remained relatively low by historical standards, we added another $4bn to credit reserves to reflect the current economic outlook. We ended the quarter with record deposits of $1.7trn, $242bn in common equity, and $21 billion in credit reserves that we believe will allow us to continue to be a source of strength."