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Paul J. Davies

Big Banks Suffer Loan Pain, Just Not the Kind We Expected

Financing corporate loans was a weak spot for Wall Street in the second quarter. 

Loan markets have been locked shut for weeks

Loan markets have been locked shut for weeks

Photographer: Paul Hanna/Bloomberg

Everyone was watching US bank results for signs that consumers were getting into financial trouble — but the pain came from other places, especially financing takeovers.

In second-quarter earnings, Bank of America Corp. topped the table in markdowns on loans to finance deals, mainly for companies backed by private equity, with a $320 million hit it reported on Monday. The market for leveraged loans has been locked shut for weeks as investors fled in the face of sharply rising interest rates. The total losses reported by the big six US banks on corporate loans for sale — a mix of leveraged finance and other loans — now totals $1.32 billion in the second quarter. Goldman Sachs Group Inc., which also reported Monday, lost $225 million on such loans, putting it fourth on the list behind Morgan Stanley and JPMorgan Chase & Co.