Bank of America CEO Brian Moynihan said Friday that the bank is preparing for a possible recession in 2023, including a scenario where unemployment rises rapidly.
“Our baseline scenario contemplates a gentle recession. … But we also add to that a downside scenario, and what this leads to 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 five.5% early this yr and remain at 5% or above through the top of 2024, Moynihan said.
The CEO’s statement mirrors the earnings report for JPMorgan Chase, whose economic outlook calls for “a gentle recession within the central case.”
Bank of America beat estimates on the highest and bottom lines for its fourth quarter, but its $1.1 billion provision for credit losses was a pointy reversal from a negative number in that metric a yr ago.
While the bank said net credit charge-offs are still below pre-Covid pandemic levels, outstanding balances on bank cards are up 14% yr over yr, and Moynihan said delinquencies are rising from their unusually low pandemic levels.
Shares of Bank of America were up 2.2% on Friday.
