Banks have scrambled to come up with payment
options for their now-distressed customers,
from cutting fees, making monthly payments
smaller or allowing borrowers to skip a month’s
payments altogether. Roughly one in six small
businesses that have loans with Bank of America
are now in some sort of payment deferral
program, the bank said.
BofA said it nearly quintupled its loan loss
provisions to $4.76 billion, while Citi set aside
$7.03 billion, up from $1.98 billion in the first
quarter a year earlier. Both have large credit
card operations, and BofA also has a large
consumer banking business while Citi has a
large international banking franchise and lends
to companies around the globe.
BofA and Citi fared better than rivals JPMorgan
and Wells, which both saw steeper profit
declines and proportionately set aside more
money to cover loan losses. But Wall Street
expects the industry will have to boost its bad
loan cushion even further.
“These are all guesses at this stage,” said
Octavio Marenzi with the consultancy firm
Opimas, in an email to investors. “The credit
risk models created by banks have never seen
anything like this crisis and are not likely to be
able to make accurate forecasts. If anything, it
looks like BofA’s loss provisions are on the light
side and we expect to see greater provisions for
loan losses in Q2.”
In a conference call with investors, BofA CEO
Brian Moynihan said the figures out Wednesday
were preliminary and added the bank would set
aside more money next quarter if needed.
Charlotte, N.C.-based BofA earned a profit of
$4.01 billion, or 40 cents a share, down from