In the July-September 2000 quarter Bank of America, the second largest US financial services company, whose interests include factoring, recorded its non-performing loans at $4.4 bn, an increase of 45% over the $3 bn of July-September 1999.
The bank reports that this development is concentrated in specific industries, including financial services and cinemas, that have experienced slower demand and is not a reflection of broader weakening in economic growth. However, further loan problems are anticipated in the two quarters ending March 2001 and some observers believe that write-offs will rise in the near future.
The bank’s loan loss reserves are reported to be falling, though it has pointed out that its reserves are based on loan losses which fell by 7% from $470m in March-June 2000 to $435m in July-September. To the extent that reserves are increased to accommodate future loan losses, earnings are expected to fall.
Financial Times
