Bank of America reports rising credit losses, nonperforming loans, and warns of potential downside.

From Nasdaq: 2024-10-16 07:30:00

The banking and finance sector begins earnings season, providing insights into market trends. Bank of America reports on consumer sector trends, with increasing provisions for credit losses. Nonperforming loans are up to $5.6 billion, with management preparing for further losses. Net charge-offs and delinquencies are also on the rise.

Key consumer discretionary stocks like Nike and Lululemon are trading significantly below their 52-week highs. Bank of America’s earnings highlight bearish price action in these stocks, with rising credit loss provisions and nonperforming loans. Net charge-offs and delinquencies have also increased, driven mainly by credit cards.

Bank of America is experiencing a slowdown in the residential mortgage business, with net originations down from a year ago. The weakening state of the real estate sector reflects slowing demand for mortgage loans. Falling bond prices pose a risk to the bank’s balance sheet, with potential losses from its significant bond holdings.

Warren Buffett sold most of his stake in Bank of America due to potential losses from the bank’s bond holdings. Wall Street analysts have a consensus price target of $42.3 per share, signaling possible downside. Investors should be cautious with consumer discretionary stocks and monitor the bond market for potential impact on banking stocks.



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