Bank of America top honcho Brian Moynihan spent 10 years preparing his bank for the next financial turmoil. Until, the coronavirus pandemic broke out - and changed everything.
Bank of America reported a gloomy first quarter scenario that did not bode well for the bank's balance sheets and forced it to bulk up its war chest in the midst of the darkest stock market selloff in many years.
Bank of America Corp revealed a 49 percent decrease in net income for the first quarter on Wednesday, warning it expected a recession due to the pandemic and putting aside a further $3.6 billion to cover future losses.
Bank of America traded lower on Wednesday morning after posting $0.40 in earnings per share for the first quarter this year, missing more than 30 percent of estimates.
Revenues dropped to $22.8 billion or 1 percent year-over-year, meeting consensus forecasts of $22.6 billion, with the widespread shutdown impacting results across all product lines.
Moynihan disclosed that his $2.3 trillion banking empire is able to survive the unprecedented outbreak during a Tuesday morning call with members of the press about first quarter results, but acknowledged he has no idea when it will end or how much suffering it will inflict until it does.
The second-largest lender after JPMorgan Chase reported $4.8 billion in credit risk provisions, even more than some of its peers, as the disease shut down the U.S. economy and pummeled stock and bond markets.
Analysis by the bank showed growth would gradually rebound from the second quarter, with negative gross domestic product growth levels continuing well into next year, said Chief Financial Officer Paul Donofrio. Shares of Bank of America dropped 7 percent to $22.07.
Bank of America joined other big Wall Street finance institutions in their dour economic outlook, offering fresh information about the effect widespread lockdowns have had on the economy to curb the spread of the virus.
Many big borrowers, including JPMorgan Chase & Co, Citigroup Inc, and Wells Fargo & Co, have also pooled assets to withstand possible loss.
Bank of America has reported that it has set aside $3.6 billion in expectation of other loans going unpaid as the global health crisis keeps companies shuttered. This figure is far less compared to the sums Wells Fargo and JPMorgan have set aside.
Meanwhile, the bank earned $866 million in its global wealth and investment management business, down $177 million, or 17 percent, mainly driven by pandemic-linked reserve build and its effect on its ledgers.
