Bank of America Faces Setback as Bloomberg Stops Publishing Short-Term Rates Index
- Wednesday, October 16, 2024
Shares of Bank of America (BofA) took a hit on Monday following the news that Bloomberg will no longer publish its Short-Term Bank Yield Index. This index served as an alternative to the London Interbank Offered Rate (Libor). As a result, BofA is expected to recognize a net non-cash pretax charge of approximately $1.6 billion in the fourth quarter.
Despite this setback, it's important to note that BofA shares have remained relatively flat over the past year. On Monday, the stock price dropped by 1.6% to $33.88. Meanwhile, the SPDR S&P Bank exchange-traded fund experienced a slight increase of 0.2%, and the S&P 500 rose by 0.5%.
The decision by Bloomberg Index Services to discontinue its Short-Term Bank Yield Index has significant implications for BofA and other banks that utilize this index in their lending agreements. This change has resulted in an impact on the accounting treatment of certain transactions for BofA.
To mitigate the effects of this adjustment, BofA expects the $1.6 billion net impact to be recognized back into its interest income over the course of the next six years, primarily through 2026.
This announcement comes just ahead of BofA's fourth-quarter earnings report, which is scheduled to be released on Friday. According to FactSet, Wall Street analysts are anticipating earnings of 58 cents per share and total revenue of $23.84 billion.
It remains to be seen how this development will ultimately impact BofA and its financial performance in the coming quarters.
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