Bank of America Profit Falls 16% -- 3rd Update
15 October 2020 - 12:38AM
Dow Jones News
By Ben Eisen
Bank of America Corp.'s profit fell 16% in the third quarter,
though the bank indicated that it is well prepared to weather the
coronavirus recession.
The Charlotte, N.C., lender said Wednesday that it earned $4.88
billion in the July-to-September period, compared with $5.78
billion a year ago and $3.53 billion in the prior quarter.
Profit amounted to 51 cents per share. Analysts polled by
FactSet had forecast 49 cents.
America's second-largest bank has struck a more optimistic tone
than some of its rivals in recent months, saying that consumption
is bouncing back after the initial shock of the economic shutdown.
The bank said that its customers spent more in the third quarter
than they did a year ago as the economy reopened.
"We are seeing a return to the fundamentals of a generally sound
underlying economy but we won't get there until we have fully
addressed the healthcare crisis and its associated effects," CEO
Brian Moynihan said on a call with analysts Wednesday morning.
While Bank of America, like its peers, has put away billions of
dollars to cover loan defaults, its provisions have been smaller.
Now, the bank and its competitors signaled they are holding off for
now on more major reserve builds. JPMorgan Chase & Co. on
Tuesday said its profit rose from a year ago and Citigroup Inc.
said its profit fell, but both banks set aside less additional
money than in the previous two quarters for potential loan
losses.
In the third quarter, Bank of America set aside $1.39 billion.
That was far smaller than its earlier provision of $5.12 billion in
the second quarter and $4.76 billion in the first quarter.
Provisions included more money set aside for commercial loans in
hard-hit industries such as travel and entertainment. Notably, the
bank released $269 million of its reserves for consumer loan
losses, saying credit-card balances are lower and the economy is
improving.
The bank posted revenue of $20.34 billion in the third quarter,
down 11% from last year. Analysts polled by FactSet had expected
$20.8 billion. Revenue was down in all of its divisions except
trading.
Adjusted trading revenue of $3.34 billion was up 4% from $3.22
billion a year ago. Last quarter, the division posted revenue of
$4.41 billion.
Trading revenue jumped 30% at JPMorgan and 17% at Citigroup,
with traders taking advantage of uncertain markets.
The investment-banking arm posted fee growth of 15% from a year
ago, led by underwriting of stock offerings during what has turned
out to be a blockbuster few months for IPOs. Total fees of $1.77
billion compared with $1.53 billion a year earlier. However, the
bank also booked lower fees from mergers and bond issuance.
Superlow interest rates have presented another challenge for
banks, eating into what they earn from lending money. Bank of
America's interest income fell 17% from a year ago to $10.13
billion, while its noninterest income fell 4% to $10.21
billion.
Bank of America shares fell 1.6% in premarket trading Wednesday.
Bank stocks have tumbled this year, far underperforming the broader
S&P 500, which is currently trading near record highs.
Write to Ben Eisen at ben.eisen@wsj.com
(END) Dow Jones Newswires
October 14, 2020 09:23 ET (13:23 GMT)
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