BofA falls to worst loss in its history

City A.M. Reporter
BANK of America yesterday reported its biggest-ever quarterly loss – $8.8bn (£5.46bn) – as low interest rates squeezed lending margins at the largest US bank.

The loss was widely expected after the bank said in June that it settled with mortgage bond investors for $8.5bn and was taking more than $14bn of other home loan-related charges in the quarter.

But the bank’s results, including its shrinking interest income, underscore the difficulties chief executive Brian Moynihan faces even if the bank moves past its mortgage problems. The bank’s shares fell 1.2 per cent in early trading.

The bank’s credit losses declined during the quarter and some businesses improved their performance, but the economy is not likely to improve much in the short term, Moynihan said on a conference call.

Given Bank of America’s mortgage and interest income difficulties, it will not likely be able to boost its dividend for some time, analysts said.

The bank’s loan book shrank, unlike many of its rivals, and the longer-term rates at which banks can lend are falling relative to the short-term rates at which banks borrow. At Bank of America, these factors translated to a 13 per cent decline in interest income and a sizable 0.17 percentage point decline in lending margins from quarter one.

On a conference call, chief financial officer Bruce Thompson said the bank was “pretty close” to the trough for net interest income, if it was not there already.

Overall, revenue tumbled 54 percent to $13.5bn because of a provision taken as part of the mortgage settlement. Excluding that, revenue was $26.5bn.

• Wells Fargo & Co last night posted 30 per cent increase in second quarter profits, beating analyst expectations as it cut costs and dipped into funds previously set aside to cover losses.