Bank of America profit drops on loan-loss reserve build

BANK of America joined other big US banks in reporting a 9 per cent drop in third-quarter profit on Monday (Oct 17) as it set aside funds to cover soured loans from a potential deterioration in the US economy.

The second-largest US bank added US$378 million (S$538.9 million) to its loan-loss reserves as it braces for a weakening economy. That compares with a release of US$1.1 billion a year earlier.

The US Federal Reserve’s aggressive monetary policy actions to tamp down inflation have sparked concerns that the economy could slip into a recession as interest rates rise.

“Our US consumer clients remained resilient with strong, although slower growing, spending levels and still maintained elevated deposit amounts,” said chief executive officer Brian Moynihan.

The bank’s consumer business reported a 12 per cent jump in revenue, helped by higher balances and a rise in interest rates.

Investment-banking fees fell 46 per cent as global dealmaking shrank for the third consecutive quarter after a blockbuster 2021.

The bank, however, managed to retain its top spot in global leveraged finance this year even as deal volumes in the sector shrank by a quarter to US$1.4 trillion, according to data from Dealogic.

Excluding items, it earned 81 cents per share, according to Refinitiv calculations, beating the average analyst estimate of 77 cents per share, driven by a 24 per cent gain in net interest income.

Net profit applicable to common shareholders was US$6.6 billion, or 81 cents a share, for the quarter ended Sep 30, compared with US$7.3 billion, or 85 cents a share, a year earlier. REUTERS