Brian Moynihan says Bank of America expects ‘mild recession’ and is preparing for worse
Brian Moynihan, chief executive officer of Bank of America Corp., during a Senate Banking, Housing, and Urban Affairs Committee hearing in Washington, D.C., on Thursday, Sept. 22, 2022.
Al Drago | Bloomberg | Getty Images
Bank of America CEO Brian Moynihan said Friday that the bank is preparing for a potential recession in 2023, including a scenario where unemployment rises rapidly.
“Our baseline scenario contemplates a mild recession. … But we also add to that a downside scenario, and what this results in is 95% of our reserve methodology is weighted toward a recessionary environment in 2023,” Moynihan said on a call with investors.
That pessimistic case, which is more negative than it was last quarter, calls for unemployment to rise to 5.5% early this year and remain at 5% or above through the end of 2024, Moynihan said.
The CEO’s statement mirrors the earnings report for JPMorgan Chase, whose economic outlook calls for “a mild recession in the central case.“
Bank of America beat estimates on the top and bottom lines for its fourth quarter, but its $1.1 billion provision for credit losses was a sharp reversal from a negative number in that metric a year ago.
While the bank said net credit charge-offs are still below pre-Covid pandemic levels, outstanding balances on credit cards are up 14% year over year, and Moynihan said delinquencies are rising from their unusually low pandemic levels.
Shares of Bank of America were up more than 2% on Friday.