(AOF) – Like its competitors Citi and JPMorgan, Bank of America unveiled lower results due to the rise in the cost of risk caused by the deterioration of the economic outlook. In the third quarter, its net profit fell 8% to 7.1 billion dollars, or 81 cents per share. The consensus was 77 cents per share. The cost of risk rose $1.5 billion year-on-year to $898 million.
The American bank recorded 378 million dollars in provisions for bad debts while it had benefited from 1.1 billion dollars in provision reversals a year earlier.
Revenue rose 8% to $24.5 billion, including $13.8 billion in interest income, up 24%. Analysts were less optimistic and were aiming for an average of $23.5 billion.
As with its competitors, revenues from its investment bank fell sharply due to difficult market conditions. They fell 46% to $1.17 billion.
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The negative effects of rising interest rates
The rise in interest rates normally causes an increase in bank income through the loans granted. In Europe, according to a survey conducted by S&P among 85 banking establishments, the sector expects an average increase of 18% in its net interest income. However, this new inflationary context also has undesirable effects, in particular an increase in refinancing costs. It is also accompanied by the fear of a new recession, which would then affect all the bank’s businesses, ranging from loans to asset management, whose income is correlated to market valuations. Reassuring element: the banks of the euro zone are sufficiently solid to face a deterioration of their environment.