Party’s Over

bank of america

What’s going on?

So much for a post-pandemic blowout: Bank of America (BoA) – the second-largest US bank by assets – announced disappointing results on Wednesday.

What does this mean?

Still, BoA can’t be too irked with the government support programs: a lot of customers wouldn’t have been able to pay their loans back at all if not for them. And now that the biggest risks are in the rear-view, BoA felt confident enough to release cash it had set aside in case pandemic-hit borrowers couldn’t repay their loans, adding a tidy $2 billion to its bottom line.

Why should I care?

For markets: BoA is the rule, not the exception.
Investors sold off BoA’s shares on the back of the update, but at least the bank can take some comfort knowing that it isn’t alone. Both Citigroup and Wells Fargo admitted on Wednesday that their lending businesses took a knock last quarter: they posted 3% and 12% drops respectively in the total value of their loans compared to the same time last year.

Zooming out: A new borrower to the rescue.
Maybe all BoA needs is a new kind of borrower – like, say, weed companies. The drug’s still illegal on the federal level, which means they’ve been locked out of the US banking system up to now. But that could be about to change, with lawmakers unveiling a bill proposing nationwide marijuana legalization on Wednesday. If the bill ever becomes law, banks will finally be able to offer cannabis companies bank accounts and – you guessed it – loans.

For information purposes only, not intended to constitute financial advice from us. The customer should assess the risk of  potential loss carefully and individually before investing in any financial products. Dabbl Group Limited is authorised by the FCA under the reference numbers 767263 as an appointed representative of its Principal firm VIBHS Financial Ltd, which is authorised and regulated by the Financial Conduct Authority under the reference number 613381.

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