Bank of America says it has found a growth opportunity courting European companies with U.S. subsidiaries as beleaguered European banks retrench.
Alastair Borthwick, B of A's head of global commercial banking, said Wednesday that the Charlotte, N.C., bank is growing its market share in subsidiary banking, offering credit, treasury and global banking services to U.S. subsidiaries that previously were served by European banks.
"We've had terrific growth in terms of international subsidiary banking," Borthwick said at the Credit Suisse Financial Services Forum in Miami. "As we've seen one or two of the international banks exit certain countries, that's allowed us to pick up a fair amount of subsidiary banking."
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B of A executives capped a challenging year by reporting strong consumer and global lending as well as other upbeat fundamentals, but like a lot of their banking peers spent most of their earnings presentation fighting off gloomy questions about the future.
January 19
B of A's global banking business had net income of $5.3 billion last year, an 8% drop from a year earlier, while revenue fell 4% to $16.9 billion from a year earlier. Global banking contributes 31% to B of A's total net income.
The company is hoping the pickup in European subsidiary-banking business and other lines will help offset ill effects from the energy slump. B of A's global banking business increased net chargeoffs to $186 million in the fourth quarter, from the third quarter, due almost entirely to losses in the energy sector.
Borthwick said the bank has seen no significant change to its energy exposure since the end of the fourth quarter.
"There's no substantive or meaningful update or change to any of that on the energy side," Borthwick said. "This sector, obviously at this point in time, has a lot of our management attention."
B of A has estimated it would have $700 million in total losses if oil prices held steady at $30 a barrel for nine quarters.
B of A has set aside a $500 million loan loss allowance for its $21.3 billion energy portfolio. That allowance represents 6% of its exposure to its two higher-risk energy subsectors: exploration and production companies and oil-field-services firms.
