Bank of America Corp (BAC.N) recorded a 48.5% fall in quarterly profit on Wednesday, as it set aside $3.6 billion in provisions to cover for potential lossses tied to the coronavirus pandemic.
Wall Street banks are bracing for the worst recession in generations with the pandemic shuttering businesses and putting nearly 17 million Americans out of work.
Including BofA’s reserve build, the top 3 Wall Street banks have stashed away over $14.2 billion due to growing concerns about whether corporate clients and consumers will be able to pay back.
Analysts, however, have said that Bank of America, known as a more conservative bank, can weather a downturn better than its peers due to its smaller exposure to credit cards and tighter credit standards.
“Of the three money center banks they are probably in the best position in terms of credit,” UBS analyst Saul Martinez said in an interview.
In the short term, banks have seen higher loan and deposit growth as cash-strapped customers seek funding to tide them through the crisis and investors stash away cash to wait out the choppy financial markets.
Average loans during the period rose 6% to $954 billion and deposits rose 6%. On Tuesday, JPMorgan (JPM.N) reported a 6% increase in loans and a 23% jump in deposits.
Net interest income, a key measure of how much banks can make from their lending activities, has also been pressured by the pandemic as the U.S. Federal Reserve slashed interest rates to near-zero levels.
Bank of America, one of the most rate sensitive banks, said net interest income during the quarter fell 2% to $12.13 billion.
Overall net income applicable to common shareholders fell to $3.54 billion, or 40 cents per share, in the first quarter, coming in below the 46 cents per share predicted by analysts, according to Refinitiv data.
Reporting by Noor Zainab Hussain in Bengaluru and Imani Moise in New York; Editing by Saumyadeb Chakrabarty and Lauren Tara LaCapra
— Reuters