Posted on Jul 14, 2021, 2:13 PMUpdated on Jul 14, 2021, 2:27 PM
Bank of America, the second-largest US bank by assets, posted net income up nearly 170% to $ 9.2 billion in the second quarter. A performance significantly better than that expected by analysts.
This good performance is, however, partly linked to the bank’s decision to lower the level of reserves put in place to prevent the effects of the Covid-19 pandemic. Over the same period, its turnover appears to be below analysts’ expectations. With these results, the title lost nearly 2% on the stock market at the opening of the New York Stock Exchange on Wednesday.
Reduction of provisions
After JP Morgan and Goldman Sachs, it is therefore Bank of America’s turn to surprise analysts. The American bank has indeed posted earnings per share of $ 1.03 in the second quarter, significantly higher than expectations which were closer to $ 0.80.
The dramatic increase in net income, however, can be explained in part by the bank’s decision to reduce its provisions for credit losses. The bank had increased its reserves by 4 billion in the second quarter of 2020 to be able to cope with possible defaults from its customers. In view of “improving the economic environment” as the economy recovers, she decided to reduce them. It took back $ 2.2 billion in reserves during the quarter, up from $ 2.7 billion previously.
“Consumer spending is significantly exceeding pre-pandemic levels, deposit growth is high and lending levels have started to rise,” said facility CEO Brian Moynihan. Personal customer debit and credit card spending rose 16% from the previous quarter.
Negative impact of lower interest rates
But, at the same time, the bank’s turnover turns out to be below the expectations of these same analysts. Penalized by the fall in interest rates, which affects the amount she earns by lending money, it fell 4% to $ 21.5 billion over this period. Or less than the 21.9 billion expected on average by analysts.
The turnover is also penalized by the decline in activity in brokerage, compared to the same period last year. At the time, traders took advantage of the high volatility in the financial markets.
–
