Bank of America saw a 45% drop in profit for the quarter ending March 31, as the bank followed its peers in setting aside funds in preparation for bad loans, an expected result of the coronavirus pandemic.
The Charlotte, North Carolina-based bank reported profit of $4 billion for the quarter, compared with $7.3 billion a year earlier, as it set aside $3.6 billion for loan losses related to COVID-19. JPMorgan Chase and Wells Fargo also set aside billions in the quarter in preparation for a recession.
"Despite increasing our loan loss reserves, we earned $4 billion this quarter, maintained a significant buffer against our most stringent capital requirement, and ended the quarter with more liquidity than when we began," Bank of America CEO Brian Moynihan said in a statement.
The nation's second-largest bank expects loan losses to increase dramatically this year as social distancing orders enacted in response to the pandemic continue to slow the economy.
Bank of America Chief Financial Officer Paul Donofrio expects losses will increase this year and could continue into 2021, he said Wednesday during the bank’s earnings call.
"We sized our reserve build in Q1 by weighting a number of economic scenarios, all of which assumed a recession of various depth and longevity," Donofrio said. "That included assuming some tail risk similar to what's in the severely adverse scenarios. Obviously there are many unknowns, including how government fiscal and monetary actions will impact the outcome … But perhaps the biggest unknown is how long economic activities and conditions will be significantly impacted by the virus."
The bank said it extended $67 billion in net funding to commercial clients through committed loan draws during the quarter.
Bank of America, an early participant in the Small Business Administration’s $350 billion Paycheck Protection Program (PPP), said it received 279,000 PPP applications totaling $43 billion through April 8.
"We are taking extraordinary steps to support our employees, clients and communities during this humanitarian crisis," Moynihan said.
More than 150,000 employees are working remotely, and the company has deployed 90,000 laptops in the past 60 days, Moynihan said as the bank practices its own social distancing. The bank also said more than 75% of its financial centers remain open despite the pandemic.
Bank of America's consumer banking unit saw profit drop 45% to $1.8 billion, while profit in its wealth management division fell 17% to $866 million during the quarter.
The bank’s trading arm, however, saw a 34% increase of $1.5 billion during the period.