Bank of America benefits more than half as bad loan threat looms

(Reuters) – Bank of America Corp saw its earnings more than half in the second quarter as it set aside $ 5 billion against future credit losses in what its top boss called the “most tumultuous period since the Great Depression.”

The falls in income and earnings were broadly similar to those of other major US banks this week that have suffered a combination of the need to prepare for a deep recession, while benefiting from increased volatility in the financial market and trade since February.

However, shares in Bank of America fell about 3.3% in response to the results, showing that it set aside a much smaller dollar amount for reserves this quarter than some of its peers earlier in the week.

That was in part because the bank had booked more than some in the first quarter, but its provisioning expenses rose just 7% in the second, compared to a 26% increase at JPMorgan Chase & Co, a jump from 12% at Citigroup Inc and more than double at Wells Fargo.

Net income applicable to common shareholders fell to $ 3.28 billion, or 37 cents a share, for the second quarter ended June 30 from $ 7.11 billion, or 74 cents a share, a year earlier.

Analysts on average expected 26 cents a share in adjusted earnings, according to Refinitiv.

“The strong results from the capital markets provided a significant counterweight to the COVID-19 related impacts on our consumer business,” said CEO Brian Moynihan.

The bank’s global markets unit net income increased 81% to $ 1.9 billion, while its net interest income (NII) fell 11% to $ 10.8 billion.

NII, a key measure of how much banks can earn from their lending activities, has been pressured by the pandemic as the United States Federal Reserve lowered interest rates to near-zero levels.

The Charlotte, North Carolina-based lender is especially vulnerable to rate movements due to the composition of its balance sheet.

Income, net of interest expense, fell 3% to $ 22.3 billion.

Net income from consumer banking fell to $ 71 million from $ 3.29 billion a year earlier, while global wealth and investment management revenue fell more than 40%.

Morgan Stanley posted better-than-expected quarterly earnings growth on Thursday, fueled by strong trading gains, as the coronavirus pandemic fueled record changes in global financial markets.