Weak Trading, Energy Loan Provisions Hits Bank of America
- Updated: April 14, 2016
On Thursday, the No. 2 largest bank by assets in the U.S. Bank of America posted a drop of 18% in profit for the quarter. The bank’s trading business took a hit on concerns about a slowdown in the global economy and the uncertainty about interest rates in the U.S.
BofA, one of the largest lenders in the U.S. to the gas and oil industry, has also said it put aside 30% more money to help cover bad loans, for the most part due to the struggling energy sector.
Profit was equal to the low expectations of the market after what was seen widely as the grimmest first three months for the banking industry since the country’s deep financial crisis.
Revenue from five of the six main BofA businesses fell, pulling total revenue down below expectations of Wall Street. Only consumer banking was higher during the quarter.
Market volatility that has come from a slide in oil and commodity prices, worries over the economy in China and the uncertainty about interest rates has hit the trading activity worldwide during the quarter, particularly for January through February.
Adjusted revenue from currency, bond and commodities trading was down 17.5% to just over $2.25 billion.
Shares of BofA, which dropped 20% during the just ended quarter, were down by 1% in trading before the opening bell, after increasing by 3.9% Wednesday following earnings that were better than had been expected from the country’s largest bank JPMorgan Chase.
JPMorgan’s results helped to allay some of the concerns about the banks for the quarter, reported a decline of 13.4% in revenue from bond trading.
Market activity thus far during April as well for March, has been stronger that for January and February, which has made the bank more optimistic said CFO Paul Donofrio.
BofA, based in North Carolina said its full provisions jumped to over $997 million for the quarter that had ended on March 31.
A report from Barclays estimated that over 2.3% of the total loans at BofA were related to energy back at the end of 2015.
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