Revenues at Bank of America slid four per cent in the second quarter of this year, driven by rock bottom interest rates to ease the economic fallout from Covid eating in the banking giant’s net interest income.
Overall revenue, net of interest expense, fell to $21.5bn, much lower than analysts’ estimates of $21.8bn.
Read more: JPMorgan profits surge 155 per cent
The US Federal Reserve plunged interest rates to record lows last year in an effort to offset the economic impact of the Covid crisis.
As a result, banks had the amount of income they earn – net of payments made on interest-bearing liabilities such as customer savings accounts – from lending to businesses and households slashed.
Net interest income slid six per cent in the second quarter to $10.2bn. Traders responded negatively to the poor results – the bank’s shares were down two per cent in premarket trading.
However, Bank of America’s profits surged in the second quarter of this year as it released loan loss reserves it had accumulated in anticipation of a wave of defaults amid the Covid economic crisis, it announced today.
The US banking giant’s earnings were lifted by the unloading of $2.2bn of loan loss reserves in the second quarter, triggered by an improving economic outlook as America’s vaccination programme picks up speed and Covid restrictions are eased.
Average loans sizes fell 11 per cent from last year, highlighting that borrowing demand remains weak as a result of US income protection schemes for businesses and households.
Brian Moynihan, chief executive officer of Citigroup, said: “Consumer spending has significantly surpassed pre-pandemic levels, deposit growth is strong, and loan levels have begun to grow.”
The results come as Wall Street rivals JPMorgan, Bank of America and Goldman Sachs all reported earnings this week that were partly lifted by the release of loan loss reserves.