Bank of America’s profit slid 52% in the second quarter as the company joined rivals in preparing for an onslaught of consumer defaults spurred by the pandemic’s economic fallout.
Profit at the consumer banking unit plunged 98% when compared with the same quarter last year as the coronavirus shuttered much of the U.S. economy and caused tens of millions of Americans to lose their jobs. The Charlotte, N.C., company allocated $5.1 billion for loan losses in the second quarter, the most since 2010.
Calling it “the most tumultuous period since the Great Depression,” Chairman and CEO Brian Moynihan said in a statement that “strong capital markets results provided an important counterbalance to the COVID-19-related impacts on our consumer business.”
With its 4,300 branches across the country, Bank of America is often seen as a bellwether for the U.S. consumer. Government stimulus measures and bank forbearance have kept some individuals and businesses afloat, but the largest U.S. lenders used the first full quarter with the pandemic to prepare for coming pain.
JPMorgan Chase, Wells Fargo and Citigroup set aside almost $28 billion of credit-loss provisions when they reported results earlier this week, citing a
Shares of Bank of America slipped 2% to $24.10 at 6:58 a.m. in early New York trading. They had declined 30% this year through Wednesday.
The bank joined other Wall Street firms in profiting from volatility in financial markets resulting from the pandemic. Fixed-income trading revenue beat forecasts in the second quarter, rising 50% to $3.2 billion, while investment banking fees jumped 57% to a record $2.2 billion.
Net interest income fell 11% to $10.8 billion in the second quarter. On a fully taxable-equivalent basis, the figure was $11 billion, falling short of the $11.2 billion average estimate of 11 analysts in a Bloomberg survey.
In the consumer business, the bank said it had processed about 1.8 million payment deferrals this year, of which 1.7 million were still in place as of July 9.
Also in the second-quarter results:
- The bank’s efficiency ratio, a measure of profitability, worsened to 60% from 59% in the first quarter.
- Net income fell to $3.53 billion from $7.35 billion a year earlier. Per-share earnings totaled 37 cents, beating the 25-cent average estimate of 23 analysts.
