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In a recent development, Bank of America has reported a staggering $131.6 billion in unrealized losses on securities for the third quarter, marking a 24.4% increase from the previous quarter.
Banking Crisis Continues
Bank of America’s bond market losses have come under scrutiny following the collapse of several US banks earlier this year. This revelation raises concerns that America’s second-largest bank, with $2.5 trillion in total assets, may be compelled to sell these bonds at a loss if depositors demand swift withdrawals.
However, in its Q3 earnings report, the bank remains optimistic, believing that these alarming portfolio losses won’t translate into actual long-term financial setbacks.
Analysts also express confidence in the bank’s ability to weather the storm, thanks to its robust liquidity, stemming from consumer deposits and a higher capital base.
Read More: US retail sales GDP growth increased by 4%
Bank of America’s Financial Health Scrutinized
Gold investor Peter Schiff has weighed in on Bank of America’s situation, highlighting the bank’s reported 10% profit growth to $7.8 billion. He points out that despite this apparent success, the bank’s financial stability is questionable due to ignoring a substantial $95.9 billion loss on its “held-to-maturity” securities.
Moody’s Warning of a Broader Issue
A bigger concern looms as Moody’s estimates that US banks may face over $650 billion in unrealized losses. While this figure is substantial, it becomes a genuine problem only if banks are forced to sell these troubled assets.
The risk of selling off these assets could materialize if there is a run on banks or if deposit levels plummet to alarming lows.
High Interest Rates Bolster Banks
Notably, Bank of America isn’t the only institution posting solid financial reports. JPMorgan Chase, Citigroup, and Wells Fargo all surpassed expectations in their third-quarter earnings.
Banks are capitalizing on high-interest rates, capitalizing on the significant difference between the rates they offer to savers and charge to borrowers.
Government Intervention in Banking
The US government’s Bank Term Funding Program has reached an all-time high of $109 billion, as reported by the St. Louis Fed. This emergency lending initiative has been supporting smaller banks since its launch in March.
Singapore’s Credit Suisse Under Scrutiny
In a related development, Singapore’s financial regulator is set to conduct an on-site inspection of Credit Suisse Group. This move comes in the wake of at least one customer’s involvement in a $2 billion money laundering scandal.
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Disclaimer: Please note that this article serves solely for informational purposes. As such, it is not financial advice. We strongly advise readers to conduct thorough research and consult with financial professionals before making any investment decisions.
