The CEO of the bank, Brian Moynihan, claims that the baseline scenario for the company is a mild recession. However, they also add a negative scenario, which means that 95 percent of their reserve methodology is weighted toward a recessionary environment in 2023.
The CEO’s statement is in line with JPMorgan Chase’s earnings report, which predicts “a mild recession in the central case.”
Although Bank of America’s fourth-quarter results exceeded expectations on the top and bottom lines, the company’s provision for credit losses of $1.1 billion marked a sharp turnaround from a negative number a year earlier.
According to Brian, the bank is preparing for a possible recession in 2023, which could result in a rapid rise in unemployment.
Moynihan stated that the pessimistic case, which is more negative than it was in the previous quarter, calls for unemployment to rise to 5.5 percent in the beginning of this year and remain at 5% or higher through the end of 2024.
Moynihan stated that delinquencies are rising from their unusually low pre-Covid pandemic levels, despite the bank’s statement that net credit charge-offs are still below pre-Covid pandemic levels. On the other hand, outstanding balances on credit cards are up 14% year over year.