A tempestade perfeita no Bank of America
O Bank of America está sofrendo uma tempestade perfeita – reportando ontem um resultado abaixo do esperado pelo mercado no terceiro trimestre, junto com uma multa bilionária que estava fora do radar dos investidores. Para completar, o segundo maior banco dos Estados Unidos carrega uma perda contábil de cerca de US$ 100 bilhões em seu portfólio de bonds , as maiores no trimestre em toda a…
Bank of America is experiencing a perfect storm, reporting results below market expectations in the third quarter, along with a billion-dollar fine that was off the radar for investors. To top it off, the second largest bank in the United States carries a $100 billion accounting loss in its bond portfolio, the largest in the industry for the quarter.
Bank of America's stock dropped about 5% after the results, opening flat today. The company is worth $359 billion on the New York Stock Exchange. Bank of America's profit in the third quarter fell from $8.3 billion last year to $6.9 billion now; revenue fell 17% to $30 billion, and the bank's investment banking commissions dropped 11%.
The numbers were slightly below consensus, but what really took the market by surprise was a $1.2 billion fine the bank had to pay, reducing the net profit by $0.17 per share. That fine was related to money laundering monitoring violations and non-compliance with some sanctions. According to the Treasury Department, Bank of America "outsourced a fundamental part of its regulatory compliance efforts," seeking to protect its revenues.
In the call with analysts, CEO Brian Moynihan said the costs to correct these problems are already included in their expenses. "We understand the seriousness of regulatory compliance issues and we are responsible for getting it right," Moynihan said, according to Bloomberg. "We've invested billions of dollars in technology and dedicated thousands of employees to fighting financial crimes.
Our team is quite advanced in this work and committed to completing the measures required by regulators." However, a bigger theme that has been worrying the market is Bank of America's credit losses, which increased $22 billion in the third quarter to $104 billion. These losses are unrealized and relate to the market valuation of the securities in the bank's portfolio.
During the pandemic, Bank of America made a massive investment in Treasury bonds and mortgage-backed securities; at the time, Treasury interest rates were very low, around 2% per year. With recent high interest rates, these securities have devalued, generating significant losses for the bank. The losses are accounting and, if the bank holds the securities to maturity, they will not materialize.
However, there is the opportunity cost of having money tied up in low-interest rates – which has hurt Bank of America's profitability, even more compared to banks like JPMorgan, which did not make this same move. JPMorgan's losses in the third quarter, for example, reached $26 billion, a quarter of the amount reported by Bank of America.
According to Barron's, Bank of America defends that it has a "large capital flexibility" and has made many stock buybacks and dividend distributions, but the low yield credit portfolio has contributed "to a significant underperformance of the stock compared to JPMorgan." While Bank of America's stock fell 6% this year, JPMorgan's rose 3%.
Over the past five years, the gap is even larger: Bank of America's stock rose 5% on average per year, compared to JPMorgan's 18%. In absolute return: Bank of America grew 25% over the past five years, while JPMorgan grew 127%.
Written by urgent.news from Brazil Journal's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
