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面临“大萧条以来最乱的时期”,这家银行的业绩依旧不俗

面临“大萧条以来最乱的时期”,这家银行的业绩依旧不俗

Shawn Tully 2020年07月29日
虽然要预测消费者的趋势比以往任何时候都更加困难,但美国银行在其第二季度报告中给出了一条最乐观的指引。

在当前这个特殊时期,美国银行所面临的环境可谓是冰火两重天,一边是刚刚经历了迅猛暴跌的经济,一边是花钱不断、感觉好景将永远长存的消费者。像美国所有的出借方一样,美国银行亦有任务预测能够对经济恢复进程有着决定性影响的趋势:如果政府前所未有的支持,例如现金支付、额外的失业救助以及针对小企业的大额补贴耗尽之后,即将到来的这波信用卡、汽车贷款、按揭贷款等损失会达到多高的水平。

7月17日发布的美国银行第二季度报告的确预测了一大波违约浪潮的到来。在2020年上半年,美国资产额排行第二的银行摩根大通安排了自2011年前两个季度以来最大的一笔6个月风险准备金,而此时其信贷和资本业务依然受累于金融危机的后续影响。对准备金的上述额外追加影响了其2019年异常靓丽的盈利数字。

然而,美国银行的预测更多地是在碰运气,与任何其他急剧衰退时期所做的预测无异。原因有两个:第一,导致此次经济下行的起因极其不同寻常,相比此前的危机,预测其持续时间和深度则要难得多;其次,美国银行认为信贷将在危机出现后五个月内恶化,只是现在还未开始,部分原因在于政府对家庭和企业提供了前所未有的支持,以及各大银行对还款的展期。到目前为止,即便面对11.5%的失业率以及大萧条以来最快、最剧烈的GDP跌幅,消费者依然在像危机发生之前那样继续偿还贷款。如果你在情人节睡了一觉,而且刚刚才醒来,并发现美国银行的第二季度不良贷款水平依然在低位徘徊,那么你永远也不会察觉经济曾经经历了自由落体式的下跌。

这种脱节让参加电话会议的首席执行官布莱恩•莫伊尼汉感到困惑,“消费者的实际还款行为与11%的失业率根本不符。这一点与政府的刺激方案有关,而且该方案发挥了巨大的作用。”莫伊尼汉还注意到,美国银行正在应对“自大萧条以来最纷乱的时期”,而令人目眩的逆向趋势则为预测消费信贷带来了巨大挑战。

虽然要预测消费者的趋势比以往任何时候都更加困难,但美国银行在其第二季度报告中给出了一条最乐观的指引。其观点也是整体经济的一个合理走向,因为这个路径取决于美国家庭的信贷表现,以及依赖这些开支的航空公司、酒店和其他行业。

美国银行认为,拿薪资的员工还需要长时间地忍受恶劣的大环境。美国银行根据这个保守的展望安排了庞大的准备金。一个有着广泛影响力的新会计规定会让美国银行和其他大银行如今的贷款损失估算成为迄今为止消费和企业信贷领域最全面的预测。这一机制对银行今后损失估算的时限要比现行规定遥远的多,同时要求银行有能力直面整个冲击,而不是将痛苦分散到每个季度。

因此,让我们看看美国银行都在哪些方面预留了准备金,预留了多少,以及这一点会对消费者的命运带来哪些负面影响。

大额损失准备金,不俗的利润

在今年3月之前,各大银行都迎来了盈利的黄金时期,仅仅是因为消费者在信用卡、按揭贷款和其他支付方面变得比以往任何时候都更加可靠,而且企业借贷者也十分稳健。随后,3月新冠疫情的爆发让信用前景在一夜之间从光明变成了黑暗,也让银行的营收遭到重创。美国银行利润第一季度同比下滑了45%,从73亿美元降至40亿美元。在第二季度,美国银行利润出现了更大幅度的同比下滑,跌幅达到了52%,至35亿美元,也将年初至今的总营收减少了一半。到目前为止,最大的元凶在于坏账准备金的爆炸式增长。这一负担从去年前两个季度微不足道的19亿美元增至99亿美元。

然而,美国银行在第二季度依然揽获了75亿美元的利润,按年化来看就是150亿美元。美联储紧急利率削减将其利息收益限制在了110亿美元,同比下滑11%,但其存款出现了飙升,因为客户出于安全因素考虑将大量的现金存入其支票账户,而且美国银行全球市场品牌推动利润飙升了96%,达到了21.8亿美元。同时,投资者对相关债券投资热度的飙升让交易员获益匪浅。近些年来,美国银行严格的费用管理帮助它克服了超低利率困境,并保持了利润的增长。这一纪律在第二季度再次发挥了作用,因为成本与去年同期相比没有什么变化。

莫伊尼汉最看重的指标便是税前、拨备前收入,因为它能够衡量银行在信贷优良和不良时期的长期盈利能力。这些也是眼下这种艰难时期可用于提供提升准备金所需的利润。税前、拨备前收入越高,度过新冠疫情风暴的实力也就越强。上半年,美国银行在这一项目中认列了182亿美元,仅比去年同期的196亿美元低7%。换句话说,不计新增加的大额准备金,美国银行疫情期间的基础利润依然能够与今年早春之前的黄金时期相比肩。

新规要求美国银行为未来违约冲击做好准备

这些新的准备金源于美国财务会计准则委员会(Financial Accounting Standards Board)于2020年1月1日悄然实施的新规。此前,在信用卡信贷领域,旧规并不要求对当前贷款进行亏损评估,而只需评估一年期以上的濒危贷款(也就是客户定期支付利息,但有可能违约)。

“当前预期信贷损失”(CECL)标准则转变了这一方法,并强制要求银行预测贷款整个生命周期的潜在损失。穆迪投资者服务的高级副总裁大卫•芬格说:“如今银行不仅得为拖欠贷款拨备,同时还得为当前信贷以及在未来任何时候可能变为坏账的贷款拨备。”例如,如果信用卡贷款如今属于当前信贷,但美国银行预测它很有可能在18个月后违约,如果按照“已发生类目”认列损失,那么它应该在贷方实际停止支付利息数个季度之前就已认列准备金。该理念的出发点在于最大程度估算当前和濒危贷款即将出现的所有损失,并以此为基础做好所有准备金的拨备工作。

就像《财富》杂志之前报道的那样,按照基于应计模式的旧规,随着不断恶化的经济衰退导致出现更多的违约,风险金会逐渐增加。惠誉评级的北美银行高级总监贝恩•鲁莫尔称:“但新的机制意味着,银行会根据眼下其对当前信贷可能总损失额的最可靠推测,安排更多的准备金。”当前预期信贷损失规定的实施恰好赶上了新冠疫情危机,而两者的叠加正迫使各大银行在当前就得为危机期间所有贷款的所有预估未来损失做好拨备工作。

这个要求十分离谱,原因有两个:第一,疫情一开始属于健康危机而不是经济危机,因此其恢复进程预测要比普通衰退难得多;第二,我们无法预测:有多少消费者的优异还款表现来自于大规模的政府支持,以及一旦联邦政府停止发放这些款项后,这一异常靓丽的记录会恶化到什么程度。鲁莫尔说:“各大银行目前正尝试了解,损失在救助项目到期之后会达到什么程度。”

美国银行截至第二季度的资产组合看起来几乎与2月之前的黄金时期一样强劲,这一点很了不起。部分原因在于美国银行为其客户提供了广泛的还款展期。自3月16日开始,该银行已经对180万笔延期还款进行了展期,大多为信用卡借贷。好消息在于,延期请求基本上在6月末基本上就没有了。美国银行称,获得延期的信用卡持有者至少在该时段之后有过一次还款。然而,由于还款延期信用卡持有者欠款金额达到了76亿美元,依然有大量的客户和大量的余额存在风险。

鲁莫尔说:“美国银行到目前为止的拖欠贷款以及坏账率水平与高失业率环境下的数字明显不符。”在其包括840亿美元信用卡贷款的消费贷类目中,其坏账实际上在去年已经从30亿美元下滑至22亿美元,相应的占比也从0.67%降至0.49%。在商业贷款方面,坏账总额达到了22亿美元,仅占资产总额的0.41%。

坏账冲销(也就是此前借出但无法收回的款项,最后从贷款损失准备金中移除)亦是如此。对于美国银行来说,2月这个数字仅有11亿美元,与2019年同期信贷前景一片大好之时相比仅多了2亿美元。芬格说:“如果我们只看拖欠和坏账水平,我们都不会觉得当前正处于危机时期。”

展望未来

难以想象的是,客户当前的表现与美国银行对未来的看法之间竟然存在如此迥异的差距。自2019年结束以来,美国银行已经将其信贷损失准备金从94亿美元上调至194亿美元,最大一部分来自于信用卡,这一领域的准备金飙升了2.5倍,从37亿美元增至92.5亿美元,其在资产组合中的占比从3.8%升至11%。紧随其后的是商业地产。芬格说:“这是因为疫情而产生大量不确定性的另一个领域,因为疫情破坏了零售和酒店市场。”房地产准备金上调了一倍多,达到了22亿美元。这个类目和信用卡占到了信贷损失准备金增加总额的三分之二。

问题在于,美国银行的假设是否能够真正反映下行的程度以及可能的期限。莫伊尼汉两周前分享了其对经济的假设。他认为年底的失业率为10%,较当前的水平仅改善了1%,而无业人员水平在2021年上半年依然处于9%的高位,然后在年底降至7.5%。

将这一展望与美联储在6月完成的压力测试中所使用的“最不利”情形对比十分具有指导意义。该测试基于疫情爆发之前的主流环境,但与危机的V型恢复轨迹一致。美联储的经济衰退情形假设失业率在接下来的6个季度中会升至10%,然后在之后的18个月中回归8%,意味着无业人员水平在2023年中期之后很长一段时间都将处于上升状态。在这一情形下,美国银行目前有充足的准备金来消化45%的未来损失。美联储认为,只有达到了这一水平,美国银行才算是拥有充足的资本来消化预期的坏账冲销,并依然维持强劲的资本缓冲能力。

美国银行认为,尽管相对于美联储疫情前最恶劣形势的测试,新冠疫情期间的经济下行来的更加突然、更加严重,但它造成的长期破坏要小一些,因为疫情会更快地消失。实际上,美国银行称,它已经安排了应对疫情造成破坏所需的所有准备金,而且这次冲击的严重性只有美联储测试程度的一半,因为测试中的无业人员水平在此之后的三年都将顽固地徘徊于高位。

别忘了,“当前预期信贷损失”标准要求美国银行为所有其预期的未来贷款损失提前做好拨备。如果美国银行的预测是正确的,这对于银行界和美国经济来说是非常好的消息。但疫情危机是一个终极的不确定目标。芬格说:“如果新冠疫情危机持续时间过长,很有可能会出现准备金不够用的情况,这样美国银行将被迫不断追加准备金。”美国银行是否有足够的准备金来度过这场危机还将取决于银行债务宽限期以及政府刺激方案到期之后消费者违约的数量。

然而,一个鼓舞人心的现象在于,美国银行已经大幅上调了其准备金,从理论上来讲,当前的准备金将可以应对所有未来的损失,而且美国银行在过去两个季度中依然斩获了70亿美元的利润。美国银行已经暂停了所有的股票回购,同时也在补充其追加至准备金的资本。另一个值得称道的地方在于,美国银行的信用卡资产规模要比其竞争对手小得多。因此,哪怕经济恢复要比它所预测的这场持久战更加缓慢,其未来所需的额外准备金规模可能也会少一些。莫伊尼汉自豪地称,美国银行如今的信用卡信贷总量只有大萧条开始之时的一半。

美国银行为此次危机期间所做的准备要比上一次充分得多,这一点部分归功于“当前预期信贷损失”标准。此外,美国银行在应对未来损失方面也秉持着更加谨慎的态度。不过问题在于:我们处于一个危险的未知环境,这里可能潜伏着任何模型都无法预测的风险。(财富中文网)

译者:Charlie

在当前这个特殊时期,美国银行所面临的环境可谓是冰火两重天,一边是刚刚经历了迅猛暴跌的经济,一边是花钱不断、感觉好景将永远长存的消费者。像美国所有的出借方一样,美国银行亦有任务预测能够对经济恢复进程有着决定性影响的趋势:如果政府前所未有的支持,例如现金支付、额外的失业救助以及针对小企业的大额补贴耗尽之后,即将到来的这波信用卡、汽车贷款、按揭贷款等损失会达到多高的水平。

7月17日发布的美国银行第二季度报告的确预测了一大波违约浪潮的到来。在2020年上半年,美国资产额排行第二的银行摩根大通安排了自2011年前两个季度以来最大的一笔6个月风险准备金,而此时其信贷和资本业务依然受累于金融危机的后续影响。对准备金的上述额外追加影响了其2019年异常靓丽的盈利数字。

然而,美国银行的预测更多地是在碰运气,与任何其他急剧衰退时期所做的预测无异。原因有两个:第一,导致此次经济下行的起因极其不同寻常,相比此前的危机,预测其持续时间和深度则要难得多;其次,美国银行认为信贷将在危机出现后五个月内恶化,只是现在还未开始,部分原因在于政府对家庭和企业提供了前所未有的支持,以及各大银行对还款的展期。到目前为止,即便面对11.5%的失业率以及大萧条以来最快、最剧烈的GDP跌幅,消费者依然在像危机发生之前那样继续偿还贷款。如果你在情人节睡了一觉,而且刚刚才醒来,并发现美国银行的第二季度不良贷款水平依然在低位徘徊,那么你永远也不会察觉经济曾经经历了自由落体式的下跌。

这种脱节让参加电话会议的首席执行官布莱恩•莫伊尼汉感到困惑,“消费者的实际还款行为与11%的失业率根本不符。这一点与政府的刺激方案有关,而且该方案发挥了巨大的作用。”莫伊尼汉还注意到,美国银行正在应对“自大萧条以来最纷乱的时期”,而令人目眩的逆向趋势则为预测消费信贷带来了巨大挑战。

虽然要预测消费者的趋势比以往任何时候都更加困难,但美国银行在其第二季度报告中给出了一条最乐观的指引。其观点也是整体经济的一个合理走向,因为这个路径取决于美国家庭的信贷表现,以及依赖这些开支的航空公司、酒店和其他行业。

美国银行认为,拿薪资的员工还需要长时间地忍受恶劣的大环境。美国银行根据这个保守的展望安排了庞大的准备金。一个有着广泛影响力的新会计规定会让美国银行和其他大银行如今的贷款损失估算成为迄今为止消费和企业信贷领域最全面的预测。这一机制对银行今后损失估算的时限要比现行规定遥远的多,同时要求银行有能力直面整个冲击,而不是将痛苦分散到每个季度。

因此,让我们看看美国银行都在哪些方面预留了准备金,预留了多少,以及这一点会对消费者的命运带来哪些负面影响。

大额损失准备金,不俗的利润

在今年3月之前,各大银行都迎来了盈利的黄金时期,仅仅是因为消费者在信用卡、按揭贷款和其他支付方面变得比以往任何时候都更加可靠,而且企业借贷者也十分稳健。随后,3月新冠疫情的爆发让信用前景在一夜之间从光明变成了黑暗,也让银行的营收遭到重创。美国银行利润第一季度同比下滑了45%,从73亿美元降至40亿美元。在第二季度,美国银行利润出现了更大幅度的同比下滑,跌幅达到了52%,至35亿美元,也将年初至今的总营收减少了一半。到目前为止,最大的元凶在于坏账准备金的爆炸式增长。这一负担从去年前两个季度微不足道的19亿美元增至99亿美元。

然而,美国银行在第二季度依然揽获了75亿美元的利润,按年化来看就是150亿美元。美联储紧急利率削减将其利息收益限制在了110亿美元,同比下滑11%,但其存款出现了飙升,因为客户出于安全因素考虑将大量的现金存入其支票账户,而且美国银行全球市场品牌推动利润飙升了96%,达到了21.8亿美元。同时,投资者对相关债券投资热度的飙升让交易员获益匪浅。近些年来,美国银行严格的费用管理帮助它克服了超低利率困境,并保持了利润的增长。这一纪律在第二季度再次发挥了作用,因为成本与去年同期相比没有什么变化。

莫伊尼汉最看重的指标便是税前、拨备前收入,因为它能够衡量银行在信贷优良和不良时期的长期盈利能力。这些也是眼下这种艰难时期可用于提供提升准备金所需的利润。税前、拨备前收入越高,度过新冠疫情风暴的实力也就越强。上半年,美国银行在这一项目中认列了182亿美元,仅比去年同期的196亿美元低7%。换句话说,不计新增加的大额准备金,美国银行疫情期间的基础利润依然能够与今年早春之前的黄金时期相比肩。

新规要求美国银行为未来违约冲击做好准备

这些新的准备金源于美国财务会计准则委员会(Financial Accounting Standards Board)于2020年1月1日悄然实施的新规。此前,在信用卡信贷领域,旧规并不要求对当前贷款进行亏损评估,而只需评估一年期以上的濒危贷款(也就是客户定期支付利息,但有可能违约)。

“当前预期信贷损失”(CECL)标准则转变了这一方法,并强制要求银行预测贷款整个生命周期的潜在损失。穆迪投资者服务的高级副总裁大卫•芬格说:“如今银行不仅得为拖欠贷款拨备,同时还得为当前信贷以及在未来任何时候可能变为坏账的贷款拨备。”例如,如果信用卡贷款如今属于当前信贷,但美国银行预测它很有可能在18个月后违约,如果按照“已发生类目”认列损失,那么它应该在贷方实际停止支付利息数个季度之前就已认列准备金。该理念的出发点在于最大程度估算当前和濒危贷款即将出现的所有损失,并以此为基础做好所有准备金的拨备工作。

就像《财富》杂志之前报道的那样,按照基于应计模式的旧规,随着不断恶化的经济衰退导致出现更多的违约,风险金会逐渐增加。惠誉评级的北美银行高级总监贝恩•鲁莫尔称:“但新的机制意味着,银行会根据眼下其对当前信贷可能总损失额的最可靠推测,安排更多的准备金。”当前预期信贷损失规定的实施恰好赶上了新冠疫情危机,而两者的叠加正迫使各大银行在当前就得为危机期间所有贷款的所有预估未来损失做好拨备工作。

这个要求十分离谱,原因有两个:第一,疫情一开始属于健康危机而不是经济危机,因此其恢复进程预测要比普通衰退难得多;第二,我们无法预测:有多少消费者的优异还款表现来自于大规模的政府支持,以及一旦联邦政府停止发放这些款项后,这一异常靓丽的记录会恶化到什么程度。鲁莫尔说:“各大银行目前正尝试了解,损失在救助项目到期之后会达到什么程度。”

美国银行截至第二季度的资产组合看起来几乎与2月之前的黄金时期一样强劲,这一点很了不起。部分原因在于美国银行为其客户提供了广泛的还款展期。自3月16日开始,该银行已经对180万笔延期还款进行了展期,大多为信用卡借贷。好消息在于,延期请求基本上在6月末基本上就没有了。美国银行称,获得延期的信用卡持有者至少在该时段之后有过一次还款。然而,由于还款延期信用卡持有者欠款金额达到了76亿美元,依然有大量的客户和大量的余额存在风险。

鲁莫尔说:“美国银行到目前为止的拖欠贷款以及坏账率水平与高失业率环境下的数字明显不符。”在其包括840亿美元信用卡贷款的消费贷类目中,其坏账实际上在去年已经从30亿美元下滑至22亿美元,相应的占比也从0.67%降至0.49%。在商业贷款方面,坏账总额达到了22亿美元,仅占资产总额的0.41%。

坏账冲销(也就是此前借出但无法收回的款项,最后从贷款损失准备金中移除)亦是如此。对于美国银行来说,2月这个数字仅有11亿美元,与2019年同期信贷前景一片大好之时相比仅多了2亿美元。芬格说:“如果我们只看拖欠和坏账水平,我们都不会觉得当前正处于危机时期。”

展望未来

难以想象的是,客户当前的表现与美国银行对未来的看法之间竟然存在如此迥异的差距。自2019年结束以来,美国银行已经将其信贷损失准备金从94亿美元上调至194亿美元,最大一部分来自于信用卡,这一领域的准备金飙升了2.5倍,从37亿美元增至92.5亿美元,其在资产组合中的占比从3.8%升至11%。紧随其后的是商业地产。芬格说:“这是因为疫情而产生大量不确定性的另一个领域,因为疫情破坏了零售和酒店市场。”房地产准备金上调了一倍多,达到了22亿美元。这个类目和信用卡占到了信贷损失准备金增加总额的三分之二。

问题在于,美国银行的假设是否能够真正反映下行的程度以及可能的期限。莫伊尼汉两周前分享了其对经济的假设。他认为年底的失业率为10%,较当前的水平仅改善了1%,而无业人员水平在2021年上半年依然处于9%的高位,然后在年底降至7.5%。

将这一展望与美联储在6月完成的压力测试中所使用的“最不利”情形对比十分具有指导意义。该测试基于疫情爆发之前的主流环境,但与危机的V型恢复轨迹一致。美联储的经济衰退情形假设失业率在接下来的6个季度中会升至10%,然后在之后的18个月中回归8%,意味着无业人员水平在2023年中期之后很长一段时间都将处于上升状态。在这一情形下,美国银行目前有充足的准备金来消化45%的未来损失。美联储认为,只有达到了这一水平,美国银行才算是拥有充足的资本来消化预期的坏账冲销,并依然维持强劲的资本缓冲能力。

美国银行认为,尽管相对于美联储疫情前最恶劣形势的测试,新冠疫情期间的经济下行来的更加突然、更加严重,但它造成的长期破坏要小一些,因为疫情会更快地消失。实际上,美国银行称,它已经安排了应对疫情造成破坏所需的所有准备金,而且这次冲击的严重性只有美联储测试程度的一半,因为测试中的无业人员水平在此之后的三年都将顽固地徘徊于高位。

别忘了,“当前预期信贷损失”标准要求美国银行为所有其预期的未来贷款损失提前做好拨备。如果美国银行的预测是正确的,这对于银行界和美国经济来说是非常好的消息。但疫情危机是一个终极的不确定目标。芬格说:“如果新冠疫情危机持续时间过长,很有可能会出现准备金不够用的情况,这样美国银行将被迫不断追加准备金。”美国银行是否有足够的准备金来度过这场危机还将取决于银行债务宽限期以及政府刺激方案到期之后消费者违约的数量。

然而,一个鼓舞人心的现象在于,美国银行已经大幅上调了其准备金,从理论上来讲,当前的准备金将可以应对所有未来的损失,而且美国银行在过去两个季度中依然斩获了70亿美元的利润。美国银行已经暂停了所有的股票回购,同时也在补充其追加至准备金的资本。另一个值得称道的地方在于,美国银行的信用卡资产规模要比其竞争对手小得多。因此,哪怕经济恢复要比它所预测的这场持久战更加缓慢,其未来所需的额外准备金规模可能也会少一些。莫伊尼汉自豪地称,美国银行如今的信用卡信贷总量只有大萧条开始之时的一半。

美国银行为此次危机期间所做的准备要比上一次充分得多,这一点部分归功于“当前预期信贷损失”标准。此外,美国银行在应对未来损失方面也秉持着更加谨慎的态度。不过问题在于:我们处于一个危险的未知环境,这里可能潜伏着任何模型都无法预测的风险。(财富中文网)

译者:Charlie

Bank of America at this juncture epitomizes a never-before-seen disparity between an economy that just underwent the fastest, deepest dive ever, and consumers who keep paying their bills as if the good times never stopped rolling. Like all of the nation’s lenders, BofA is tasked with forecasting the trend, that more than any other, will determine the course for the recovery: how high the coming wave of losses on credit cards, car loans, mortgages, and the like will rise once the government’s unprecedented support in the form of cash payments, extra jobless benefits, and big subsidies to small business run out.

BofA’s second-quarter report, released on July 17, indeed forecasts a big wave of defaults to come. In the first half of 2020, America’s second largest bank by assets to JPMorgan Chase took by far the largest loan loss provisions for any six-month period since the first two quarters of 2011, when the aftermath of the financial crisis was still pummeling its credit and capital. Those additions to its reserves hammered what had been a run of stellar earnings through 2019.

But BofA’s projections are more a shot in the dark than at the onset of any other steep recession. The reason is twofold. First, the origins of this downturn are so unusual that its length and depth are far harder to forecast than for previous recessions. Second, BofA is trying to project a deterioration in credit that, five months into the crisis, hasn’t started yet––in part thanks to the never-before-seen level of government support to families and businesses, as well as forbearance on payments from the banks. So far, the consumer is defying 11.5% unemployment and the quickest, sharpest drop in GDP since the Great Depression, to keep making payments on loans just as regularly as before the crisis erupted. If you’d gone to sleep on Valentine’s Day, and just awoke to see BofA’s still terrific second-quarter numbers for bad loans, you’d never know that the economy was in free fall.

That disconnect is flummoxing CEO Brian Moynihan, who stated on the conference call, “We are seeing nothing that is consistent with an 11% unemployment rate in actual consumer payment behavior. And that has to do with the stimulus…That’s helping substantially.” Moynihan also notes that BofA is navigating “the most tumultuous period since the Great Depression,” and that the dizzying crosscurrents pose huge challenges in forecasting consumer credit.

Although it’s never been more difficult to foresee where the consumer is headed, BofA provides one of the best guides in its second-quarter report. Its view is also a reasonable road map for the overall economy, since its course depends, more than anything else, on the credit performance of America’s families, and companies in airlines, hospitality, and other industries that rely on their spending.

BofA is reckoning that the wage and salary earners will endure a long voyage on rough seas. It’s taking big provisions based on that conservative outlook. A sweeping new accounting rule should make the estimates for loan losses that BofA and other big banks are making right now the most comprehensive forecasts ever on consumer and corporate credit. The regime requires that the banks predict losses much farther into the future than under the previous rules, and take the entire hit upfront instead of spreading out the pain quarter after quarter.

So let’s examine where BofA is building reserves, and by how much, and what that tells us about how it’s handicapping the fate of the consumer.

Big provisions for losses, decent profits

Until March of this year, the banks were experiencing a golden period of profitability––chiefly because consumers were making their credit card, mortgage, and other payments more reliably than ever before, and corporate borrowers were just as steady. Then, the COVID-19 outbreak in March transformed the credit outlook overnight from sunny to dark, hammering their earnings. BofA’s profits dropped 45% in the first quarter versus the first quarter of last year, from $7.3 billion to $4 billion. In the second quarter, it suffered a steeper, year-over-year slide of 52% to $3.5 billion, slashing total earnings in half so far this year. The biggest driver by far was an explosion in provisions for bad loans. That burden rose from minuscule $1.9 billion in the first two quarters of last year to $9.9 billion.

Still, BofA managed to book $7.5 billion in profits through the June quarter, or $15 billion on an annualized basis. The Fed’s emergency rate reductions curbed its interest income to $11 billion, an 11% drop from the second quarter of 2019. But its deposits soared as customers poured cash into their checking balances in a flight to safety, and its Global Markets franchise boosted profits by 96% to $2.18 billion as traders profited from a surge in investors’ growing hunger for the relative security of bonds. In recent years, BofA’s tight expense management has helped surmount super-low rates to keep profits growing. That discipline delivered again in the second quarter, as costs barely budged from the same period a year ago.

The metric Moynihan most stresses is pretax, pre-provision income, since it measures the bank’s long-term earning power across good and bad periods for credit. Those are also the profits available for bolstering reserves in tough times like today. The bigger the pretax, pre-provision earnings, the greater the strength for weathering the COVID-19 hurricane. For the first half, BofA booked $18.2 billion in that category, only 7% below the $19.6 billion recorded in the same period last year. In other words, excluding the big new provisions, BofA’s underlying profits remained almost as strong in the pandemic as in the flush times that extended through early spring.

A new rule makes BofA front-load the hit from future defaults

Those new provisions are the result of a rule change the Financial Accounting Standards Board quietly implemented on Jan. 1, 2020. Previously, when it came to credit card loans, the rules didn’t require estimating losses on current but endangered loans (i.e., customers regularly paying interest but likely to default) beyond a year ahead.

The current expected credit losses (CECL) standard transformed that methodology by mandating that banks forecast potential losses for the entire life of the loan. “Now they’re provisioning not just for the loans that have gone delinquent, but the ones that are current and may go bad at any time in the future,” says David Fanger, a senior VP at Moody’s Investors Service. For example, if a card loan is now current but BofA projects a high probability that it will default in 18 months, BofA is required to book a loss now, whereas under the “incurred” model, it would have booked the provision a few quarters hence, when the borrower actually stops paying interest. The idea is to front-load all the provisions based on the best estimate of all losses to come for current and delinquent loans alike.

As Fortune previously reported, under the old rule based on the accrual model, provisions tended to build gradually as a deepening recession caused more and more defaults. “But the new regime means that banks are taking much larger provisions based on their best guess at the moment of what total losses will be on still current loans,” says Bain Rumohr, senior director of North American banks at Fitch Ratings. CECL’s arrival coincided with the COVID-19 crisis, and the combination is forcing banks to take the entire hit right now for all estimated future losses on all their loans caused by the crisis.

That’s a tall order for two reasons. First, the pandemic started as a health and not an economic crisis so the shape of the recovery is far harder to predict than the comeback from a normal recession. Second, it’s extremely difficult to predict how much of the consumer’s excellent performance so far stems from the big waves of government support, and how much that gold star record will deteriorate once the federal dollars stop flowing. “What the banks are attempting to do is figure out what level of loss comes through when the programs phase out,” says Rumohr.

It’s remarkable that BofA’s portfolio as of the second quarter is looking almost as strong as during the flush times that lasted until February. In part, that’s because it’s been offering broad forbearance to its customers. Since March 16, it has extended 1.8 million payment deferrals, mostly on credit card loans, to its customers. In a good sign, requests for deferrals pretty much ceased by late June. BofA reports that 60% of credit card holders who’ve gotten forbearance have made at least one payment since. But since the cardholders with deferrals owe $7.6 billion, that still leaves a large number of customers, and large balances, at risk.

“There’s a notable disconnect between what you see so far in their delinquency and charge-off rates, and what you would typically see with high unemployment,” says Rumohr. In its consumer lending book, which includes $84 billion in credit card loans, its nonperforming credit has actually dropped from $3 billion to $2.2 billion in the past year, lowering the share from 0.67% to 0.49%. In commercial lending, the nonperformers total $2.2 billion, or just 0.41% of the portfolio.

It’s the same story with charge-offs, loans that have previously been expensed but are recognized as uncollectible and removed from loan loss reserves. That number for the entire bank was just $1.1 billion in the second quarter, a mere $200 million more than in the second quarter of 2019 when the credit outlook was terrific. “Looking at those delinquencies and charge-off levels, you wouldn’t think there’s a crisis going on,” says Fanger.

Looking ahead

It’s hard to imagine a starker contrast than the divide between customers’ current performance, and how BofA sees the future. Since the close of 2019, it has doubled allowances for loan losses from $9.4 billion to $19.4 billion. The biggest increase came in cards, where reserves mushroomed two-and-a-half times from $3.7 billion to $9.25 billion, rising from 3.8% of the portfolio to 11%. The second biggest jump came in commercial real estate. “That’s another area where the virus is causing a lot of uncertainty because it’s damaging the retail and hospitality market,” says Fanger. Real estate reserves more than doubled to $2.2 billion. That category and cards account for two-thirds of the total increase in allowances for credit losses.

The question is whether BofA is making assumptions that truly reflect the extent, and probable duration, of the downturn. Moynihan shared the assumptions on the economy that the bank is employing to estimate loan losses at two weeks ago. He’s assuming that unemployment ends the year at 10%, just a one-point improvement from the current rate, and joblessness remains high at 9% through the first half of 2021, easing to 7.5% by year-end.

It’s instructive to compare that outlook with the “most adverse” scenario that the Fed used in the latest stress test, completed in June. That test is based on conditions that prevailed before the outbreak, but is consistent with a V-shaped recovery from the crisis. The Fed’s recession scenario posits that the unemployment rate rises to 10% over six quarters, then drifts back to 8% over the next 18 months, meaning that joblessness remains elevated well beyond mid-2023. Under that scenario, BofA would have sufficient reserves today to cover 45% of future losses. The Fed deems that level BofA is holding sufficient capital to cover the projected charge-offs and still maintain a strong capital buffer.

BofA is betting that although the COVID-19 downturn is more sudden and severe than the Fed’s pre-pandemic, worst-case test, it will cause less long-term damage because it will pass much faster. In effect, BofA is saying that it’s already taken all the reserves it will need to cover damage from the pandemic, and that the hit will be about half as severe as the Fed’s test case where joblessness remains stubbornly high three years hence.

Keep in mind that CECL requires BofA to front-load all the loan losses it anticipates going forward. If BofA’s forecasts are correct, that’s great news for the bank and the U.S. economy. But the pandemic crisis is the ultimate in moving targets. “So if the COVID crisis is extremely long-lasting, it’s possible that the reserves won’t be big enough, and BofA will be forced to keep increasing provisions,” says Fanger. Whether BofA indeed has big enough allowances to get through the crisis will also depend on how many more consumers default once the banks end forbearance, and the government stimulus ceases.

It’s encouraging, however, that BofA has increased reserves dramatically, in theory to the point where current allowances will cover all future losses, and still booked over $7 billion in profits in the past two quarters. It has also suspended all share buybacks, so it’s replenishing capital at the same time that it’s adding to reserves. BofA also deserves credit for keeping its credit card portfolio at much more modest levels than its rivals, potentially limiting the extra reserves it will need to take if the recovery is slower than the already lengthy comeback it predicts. Moynihan proudly noted that BofA is now carrying half the loans to cardholders it did at the start of the Great Recession.

BofA is heading into this recession a lot stronger than the last time and, in part because of CECL, is being what looks like extra prudent in bracing for future losses. Here’s the problem: We’re in dangerous, uncharted waters, where the dragons that no model can predict may be lurking.

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