Banking stock under pressure: Bank of America Corp (NYSE: BAC)

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Bank of America Corp (NYSE: BAC) stock lost over 2.7% on 16th July , 2020 and lost over 0.04% in the pre-market session of July 17th, 2020 (Source: Google finance). For the second quarter of 2020, the bank’s Revenue, net of interest expense, fell 3% yoy to $22.3 billion while Net interest income (NII)(E) lost 11% yoy to $10.8 billion, hurt by lower interest rates, despite loan and deposit growth. Noninterest income rose 5% to $11.5 billion, driven by solid capital markets results. Net income fell to $3.5 billion, or $0.37 per diluted share, hurt by $4.0 billion reserve build due to a weaker economic outlook raised due to COVID-19 pandemic. The Pretax income lost 58% to $3.8 billion. The Provision for credit losses increased to $5.1 billion, driven by $4.0 billion reserve build. Moreover, the bank expects the ongoing uncertainty to extend till 2022.

To equip from the ongoing pandemic, the bank boosted its liquidity by $800 billion on average as of the end of the quarter while doubled credit reserves to $21 billion against year end. They enhanced common equity Tier 1 ratio at the end of the quarter to 11.4% as of the end of the quarter as compared to 11.2% at year-end, while 190 basis points above the regulatory minimum. Book value per common share rose 6% to $27.96 while tangible book value per common share rose 5% to $19.90.

 

With regards to the segment performance, the Consumer Banking Net income fell to $71 million, due to a reserve build and lower NII, even though Loans rose 8% to $322 billion while deposits surged 15% to $811 billion. The divisions Consumer investment assets rose 12% to $246 billion, boosted by flows of $23 billion since Q2-19 and market performance. Global Wealth and Investment Management divisions Client balances increased 1% to $2.9 trillion, boosted by client flows while AUM flows were $4 billion during the second quarter of 2020. The segments Loans rose 10% to $182 billion while deposits surged 13% to $287 billion. Global Banking division reported a record firmwide investment banking fees (excl. self-led) which rose 57% to $2.2 billion. The divisions Loans rose 14% to $424 billion while deposits surged 36% to $494 billion. Global Markets divisions reported the Sales and trading revenue of $4.2 billion, including net debit valuation adjustments (DVA) losses of $261 million

 

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