Bank of America CEO Brian Moynihan said on Friday that the bank is preparing for a possible recession in 2023, including a scenario where unemployment rises rapidly.
“Our baseline scenario is a mild recession. … But we also add a downside scenario to that, and the result is that 95% of our reserve methodology is biased toward a recessionary environment in 2023,” Moynihan said on a call with investors.
That bearish case, which is more bearish than last quarter, requires unemployment to rise to 5.5% earlier this year and stay at 5% or more through the end of 2024, Moynihan said.
The CEO’s statement reflects the earnings report for JPMorgan Chasewhose economic outlook calls for “a mild recession in the central case”.
Bank of America beat estimates for its fourth-quarter revenue and earnings, but its $1.1 billion provision for credit losses was a clear reversal from a negative number on that metric a year ago.
While the bank said net loan charge-offs are still below pre-Covid pandemic levels, outstanding credit card balances are up 14% year-on-year and Moynihan said arrears are rising from their unusually low pandemic levels.
Bank of America shares rose 2.2% on Friday.
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