Bank of America profits slumped 45% as it braces for a surge in bad loans
- Bank of America reported first-quarter earnings on Wednesday that beat analysts' revenue expectations but fell short of their earnings per share forecasts.
- The bank stomached higher provision expenses as it built up its loan loss reserves in response to the novel coronavirus pandemic, resulting in a 45% drop in net income.
- Net income fell across the consumer banking, global wealth and investment management, and global banking divisions, but rose in the global markets segment.
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Bank of America reported first-quarter earnings on Wednesday that beat the revenue expectations of analysts polled by Bloomberg, but fell short on earnings per share.
The banking giant's revenue slid 1% to below $23 billion, while a 45% drop in net income fueled a 43% drop in diluted earnings per share to $0.40.
Net income fell in three of the bank's four main divisions, largely due to higher provision expenses as it built up its reserves in anticipation of a surge of bad loans in response to the coronavirus pandemic.
Here are the key numbers:
- Revenue: $22.8 billion versus $22.7 billion estimated
- Earnings per share: $0.40 versus $0.59 estimated
- Net income: $4 billion versus $5 billion estimated
"Our results reflect the strength of our balance sheet, the diversity of our earnings, and the resilience of our teammates to serve clients around the world," Bank of America CEO Brian Moynihan said in the earnings release.
"Despite increasing our loan loss reserves, we earned $4 billion this quarter, maintained a significant buffer against our most stringent capital requirement, and ended the quarter with more liquidity than when we began," he added.
Revenue fell 5% and net income fell 45% in Bank of America's consumer banking segment as solid activity was offset by higher loan loss reserves and the impact of lower interest rates.
Revenue rose 2% in the bank's global wealth and investment management division, but net income slumped 17% due to higher provision expenses as the segment shored up its reserves. In the global banking business, revenue slid 11% and net income plunged more than 90% for the same reasons.
The bright spot was the global markets segment. Revenue jumped 25% and net income surged about 65%, reflecting higher sales and trading revenue, helped by huge market volatility and increased activity in recent weeks.
