US on the rise

US on the rise
Bank of America, a multinational banking and financial services corporation, has reported a strong quarterly profit. This is in trend with yet another US corporation, Lockheed Martin, that has also reported stronger than expected profit for this quarter. The subprime mortgage..

Bank of America, a multinational banking and financial services corporation, has reported a strong quarterly profit. This is in trend with yet another US corporation, Lockheed Martin, that has also reported stronger than expected profit for this quarter.

Background

The subprime mortgage crisis led to a banking emergency in the United States. This resulted in the collapse of the US economy between 2007 and 2008. Economists have compared it to the Great Depression from 1929. The government through the Emergency Economic Stabilization Act of 2008, the government prepared a $700 billion stimulus to save the banks. The Bank of America was among those to get the bailout. In 2009, the US government provided an additional $20 billion in bailout to the institution. This was after the bank reported a $2.39 billion fourth-quarter loss at that time.

In 2011, while the bank was still struggling, its CEO, Brian Moynihan said that it would soon be well over $20 billion a year. At that time, the statement was considered brazen by experts. Now it seems plausible.

Lockheed Martin Corporation, which employs 125,000 people in the United States is one of the largest defense companies in the world.

Analysis

US banks started seeing profits in 2016. Their earnings in the final quarter of the year had risen by 7.7% from the previous year. 8.1% of banks by the end of 2016 were unprofitable. Bank of America benefitted from various cost cutting measures. It has improved its technologies and there has been a growth in deposits. It has also been aided by focusing on higher-quality borrowers.

Lockheed Martin’s prospects improved due to Increased sales of its F-35 fighter jets. Being the biggest supplier of defense equipment to the US military, it registered profits worth up to $942m. It has also increased its projections for the future.

Assessment

Our assessment is that US companies, especially those in the banking sector, appear to have rebounded from the economic crisis within years. The bailout, which had been criticized when announced in 2007, has been successful in reaching its intended goal. 

Comments