Profits propped up by release of US$2.7B from reserves

Bank of America Corp (BOA) is celebrating a first quarter performance which saw a big jump in profits.

Shareholder profit went up to US$7.6 billion, coming from the US$3.56 billion made during the same period last year. News of BOA’s first-quarter profits was announced today.

However, it was noted that the bank’s profits were propelled by its release of reserves that BOA had set aside to cover potential coronavirus loan losses.

BOA, which is the second biggest banking institution in America based on assets, also announced the release of US$2.7 billion from its reserves today.

BOA betting on quick economic recovery in America

The funds were released as BOA bet on a swift economic recovery as more people get vaccinated and businesses in America return to normal. BOA experienced a 12 per cent fall in consumer banking revenue to US$8.1 billion in the quarter ended March.

Appetite for new loans waned during the pandemic as customers spent less and saved more and large companies relied on capital markets for funds rather than their bank. There is overwhelming economic data suggesting that the American economy, however, is poised to log its best performance in 37 years, thanks to the White House’s massive US$1.9-trillion pandemic relief package and increased vaccinations against the coronavirus.

In a statement today, BOA Chairman and Chief Executive Officer Brian Moynihan said: “While low interest rates continued to challenge revenue, credit costs improved and we believe that progress in the health crisis and the economy point to an accelerating recovery.”

Net income applicable to common shareholders rose to $7.56 billion, or 86 cents per share, from $3.54 billion, or 40 cents per share, a year earlier.

Analysts on average had expected a profit of 66 cents per share, according to the IBES estimate from Refinitiv.