Bank of America’s 2Q profit jumps, helped by fewer bad loans
NEW YORK — Bank of America’s second quarter profit more than doubled from a year earlier, as the consumer banking giant was able to move more loans onto the “good” side of its balance sheet as the pandemic wanes.
The Charlotte-based bank said it earned $9.22 billion in the last three months, or $1.03 per share. That is up from a profit of $3.53 billion, or 37 cents per share, from the same period a year earlier. The results were better than the 77-cent-per-share profit that analysts had forecasted, according to FactSet.
Bank of America’s profits were boosted by two one-time items. The bank was able to release $1.6 billion from its loan-loss reserves that it had set aside during the pandemic to guard against defaults, and also recorded a $2 billion one-time credit related to certain taxable assets in the U.K.While Bank of America’s profits rose from a year earlier, revenues did not. Interest income fell in the quarter to $10.23 billion from $10.85 billion a year earlier, due to lower interest rates. Bank of America’s balance sheet is more heavily weighted toward securities with short-term durations, which means the bank’s interest income can fluctuate more when interest rates change compared to other banks.
The bank also saw a decline in revenues from trading, similar to what happened at JPMorgan Chase and Goldman Sachs. The second quarter of 2020 was a highly volatile one as traders navigated the impact of the pandemic, which gave Wall Street traders ample opportunities to find investments to profit from in the volatility. Now that things have cooled down, those profits have declined.
The bank’s global markets division, which contains its trading desks, reported a profit of $908 million in the quarter. That’s down from $1.9 billion a year earlier.
Wells Fargo beats expectations with $6 billion profit in 2Q
SILVER SPRING, Md. — Wells Fargo had its most profitable quarter in two years, easily beating Wall Street estimates as the global economy continues its rapid improvement in the wake of the virus pandemic.
Wells earned $6 billion in the period, or $1.38 per share, easily surpassing analysts projections of 98 cents per share. The company lost $1.01 per share in the same period last year as the coronavirus pandemic ravaged the global economy.
Revenues also came in much higher than projections, with the bank pulling in $20.27 billion in the quarter. Analysts were expecting revenue of $17.76 billion, according to FactSet.
In a sign of the improving economic conditions, the San Francisco bank released $1.6 billion from its loan-loss reserves, money set aside to cover bad loans. Wells set aside $8.4 billion to cover potentially bad loans in last year’s second quarter.
Wells said its net interest income fell 11%, mostly due to falling interest rates and lower loan balances.As previously announced, Wells plans to raise its third-quarter dividend to 20 cents per share from 10 cents per share, pending board approval. Just more than a year ago its dividend was 51 cents per share. The company also reiterated its plan to buy $18 billion of its shares over the next four quarters.
Wells is trying to exit the strict federal guidelines that sets its asset cap just under $2 billion, hindering its ability to grow.
The Federal Reserve capped the size of Wells Fargo’s assets in 2018 after a series of scandals, most notably the uncovering of millions of fake checking accounts its employees opened to meet sales quotas. The Fed lifted that cap last April as part of the federal government’s Payroll Protection Program because many of Wells’ small business customers were blocked from applying, but most of the restrictions remain.
Inflation at wholesale level increases 1.0% in June
WASHINGTON — Inflation at the wholesale level jumped 1% in June, pushing price gains during the past 12 months up by a record 7.3%.
The Labor Department reported Wednesday that the June increase in its producer price index, which measures inflation pressures before they reach consumers, followed a gain of 0.8% in May and was the largest one-month increase since a 1.2% rise in January.
For the 12 months ending in June, wholesale prices are up 7.3%, the largest 12-month increase since the government began the current series on wholesale prices in 2010.The news on wholesale prices followed a report Tuesday that consumer prices increased in June by 0.9% and were up 5.4% over the past 12 months, the biggest 12-month gain in 13 years.
The increase in inflation is coming at a time when the economy is rebounding from the pandemic recession and rising consumer demand is bumping up against bottlenecks and supply shortages which are pushing prices higher.
Citigroup profits soar as balance sheet reflects ‘good’ loans
NEW YORK — Citigroup profits jumped more than five fold from a year earlier, helped by an improving economy that resulted in fewer bad loans on the bank’s balance sheet.
The New York-based bank said it earned $6.19 billion, or $2.85 a share. That’s up from a profit of $1.06 billion, or 38 cents a share, in the same period a year earlier. The results were significantly better than the $1.97-per-share profit that analysts had expected, according to FactSet.
Like other big banks, Citi was able to move previously bad loans onto the “good” side of its balance sheet as the economy had improved since vaccinations have become more widespread. Citi was able to release $2.4 billion from its loan-loss reserves, compared to the $5.94 billion it had to put into those reserves a year earlier.The pace of the global recovery is exceeding earlier expectations and with it, consumer and corporate confidence is rising. While we have to be mindful of the unevenness in the recovery globally, we are optimistic about the momentum ahead,” said Jane Fraser, Citigroup’s CEO, in a statement.
The improving balance sheet can be seen in Citi’s consumer banking franchise. The division reported a $1.8 billion profit in the quarter, compared to the loss it reported a year earlier. Last year’s loss was entirely tied to Citi putting away funds to cover potentially bad loans.
Bank of America nets $9.2M in 2Q
CHARLOTTE, N.C. — Bank of America Corp. (BAC) on Wednesday reported second-quarter net income of $9.22 billion.
The Charlotte, N.C.-based bank said it had earnings of $1.03 per share.
The results topped Wall Street expectations. The average estimate of seven analysts surveyed by Zacks Investment Research was for earnings of 77 cents per share.
The nation’s second-largest bank posted revenue of $22.62 billion in the period. Its revenue net of interest expense was $21.47 billion, missing Street forecasts. Four analysts surveyed by Zacks expected $21.77 billion.
Bank of America shares have increased 32% since the beginning of the year, while the S&P’s 500 index has risen 16%. The stock has climbed 65% in the last 12 months.