Bank of America CEO Brian Moynihan disclosed Friday that the bank is preparing for a potential recession in 2023, including a scenario where unemployment rises like a shot.
“Our baseline scenario contemplates a mild recession. … But we also add to that a downside scenario, and what this outcomes in is 95% of our reserve methodology is weighted toward a recessionary environment in 2023,” Moynihan said on a call with investors.
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That pessimistic case, which is more negative than it was last quarter, orders for unemployment to rise to 5.5% early this year and remain at 5% or above through the end of 2024, Moynihan weighted.
The CEO’s statement mirrors the earnings report for JPMorgan Chase, whose economic outlook calls for “a mild recession in the cardinal case.”
Bank of America beat estimates on the top and bottom lines for its fourth quarter, but its $1.1 billion provision for trustworthiness losses was a sharp reversal from a negative number in that metric a year ago.
While the bank said net merit charge-offs are still below pre-Covid pandemic levels, outstanding balances on credit cards are up 14% year finished year, and Moynihan said delinquencies are rising from their unusually low pandemic levels.
Shares of Bank of America were up 2.2% on Friday.
