Bank of America's paper loss on its bond portfolio reaches $110 bln and outpaces other banks: report

By Steve Gelsi

Barron's report says bond prices suggest drop in value in Bank of America's Held-to-Maturity securities in Q1

Bank of America Corp.'s paper loss on its Held-to-Maturity bonds most likely reached $110 billion during the first quarter from $98 billion at the end of the year, Barron's reported.

The losses are on the bank's roughly $595 billion portfolio of bonds that the bank labels as Held-to-Maturity (HTM) under U.S accounting rules. The majority of the portfolio is comprised of mortgage securities.

During the first quarter, bond yields have risen, which means that the price value of assets has come down, due to the inverse relationship between the interest generated by the bonds and the price of the underlying debt.

Held-to-Maturity (HTM) assets are one of two major types of securities that banks hold on their books, along with Available-for-Sale (AFS) securities, which a bank may sell before they reach their maturity dates.

Since the bank has no immediate plans to sell its HTM assets, the losses are categorized as unrealized.

Barron's reported that the bank's estimated unrealized losses of $110 billion as of March 31 on its HTM portfolio outpaces all other banks.

JPMorgan Chase & Co. (JPM), which is larger than Bank of America, disclosed $27 billion in paper losses on its HTM portfolio in the fourth quarter.

Bank of America did not comment on the report.

The bank has previously said its unrealized losses will go down over time as the bonds mature or are paid off.

When bond prices were rallying late last year, the HTM losses at Bank of America had dropped by $34 billion in the fourth quarter.

Unrealized losses in bank portfolios came into focus last year when Silicon Valley Bank ran into trouble with its customers over the declining paper value of its HTM portfolio. This in turn contributed to a run on deposits that put the bank out of business.

For its part, Bank of America's unrealized losses on its HTM portfolio did not draw any queries from analysts in the fourth quarter.

The portfolio is expected to dampen the bank's net interest margin, which is the profit it makes on loans after paying out interest for its deposits, the Barron's report said.

More details will come on April 16 when Bank of America reports its first-quarter earnings along with Morgan Stanley and Goldman Sachs Group Inc.

-Steve Gelsi

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04-05-24 0905ET

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