Bank of America profit drops on loan-loss reserve build

Bank of America Corp (BAC.N) joined other big US banks in reporting a 9per cent drop in third-quarter profit on Monday as it set aside funds to cover soured loans from a potential deterioration in the US economy.

The second-largest US bank added $378 million to its loan-loss reserves as it braces for a weakening economy. That compares with a release of $1.1 billion a year earlier.

The US Federal Reserve’s aggressive monetary policy actions to tamp down inflation have sparked concerns that the economy could slip into a recession as interest rates rise.

“Our US consumer clients remained resilient with strong, although slower growing, spending levels and still maintained elevated deposit amounts,” said chief executive officer Brian Moynihan.

The bank’s consumer business reported a 12per cent jump in revenue, helped by higher balances and a rise in interest rates.

Investment-banking fees fell 46per cent as global dealmaking shrank for the third consecutive quarter after a blockbuster 2021.

The bank, however, managed to retain its top spot in global leveraged finance this year even as deal volumes in the sector shrank by a quarter to $1.4 trillion, according to data from Dealogic.

Excluding items, it earned 81 cents per share, according to Refinitiv calculations, beating the average analyst estimate of 77 cents per share, driven by a 24per cent gain in net interest income.