Bank of America: Big concerns for one of America’s largest financial institutions. Bank of America braces for huge bond losses as yields soar

A sharp rise in interest rates since the end of the third quarter has widened losses on bank securities portfolios by a quarter, potentially posing a big problem for U.S. investors this year. This will be particularly problematic if banks begin reporting their fourth quarter results in the second last week of January, according to reports.

Are Bank of America’s paper losses increasing?

A Barron report now estimates paper losses on Bank of America’s nearly $568 billion U.S. bond portfolio, mostly in U.S. government agency mortgage securities. This gap could widen to as much as $111 billion, or even more, compared to the $86 billion gap at the end of September.

Total unrealized losses could now reach up to $500 billion, a significant increase from $364 billion at the end of the third quarter.

These losses at financial institutions involve nearly every bank insured by the FDIC in the United States, Baron said. The total potential losses would still be slightly lower than the bank’s massive $700 billion at the end of the third quarter of 2022.

For now, Bank of America’s huge losses are in the portfolio and classified, but they are still significant.

Are Bank of America’s paper losses significant enough?

Under accounting rules, paper losses on portfolios like Bank of America’s don’t drive down reported capital. But from an economic perspective, these losses are very real.

FAQ:

Is Bank of America profitable?
Bank of America is currently one of the most successful financial institutions in the United States and has been profitable for many years.