Bank of America and Comerica Inc. have both announced significant charges related to changes in the finance industry. Bank of America took a $1.6 billion charge in the fourth quarter of 2023 due to the industry’s shift away from the London Interbank Offered Rate (LIBOR). This non-cash, pretax charge will eventually be recognized as income. Bank of America expects to recognize the $1.6 billion back into its interest income over the next few years.
The charge resulted from certain interest-rate swaps being “de-designated” because of the move away from LIBOR. As a result of this charge, Bank of America’s common equity tier 1 ratio decreased by eight basis points. However, the bank views this as a one-time accounting charge with minimal impact on capital.
Comerica Inc., based in Dallas, also announced a charge of $91 million related to the discontinuation of the Bloomberg Short-Term Bank Yield Index. Similar to Bank of America, Comerica expects to earn back this charge over time, primarily in 2025 and 2026. Additionally, Comerica will have a $109 million charge from the Federal Deposit Insurance Corp.’s special assessment and a $25 million expense from a cost-cutting initiative in the fourth quarter.
Despite these charges, both Bank of America and Comerica believe that they will have minimal impact on their capital. These charges are viewed as one-time accounting charges, and the banks expect to recover the amounts over the next few years.
Investors will be eagerly waiting to see how these charges affect the banks’ fourth-quarter and full-year 2023 results, which are scheduled to be reported on Friday. It will be interesting to see how the finance industry’s move away from LIBOR and other changes impact the financial performance of these institutions. Celebrity Beauty Buzz readers can stay informed by visiting our site for the latest updates and analysis on this and other news in the finance industry.
