Bank of America CEO Brian Moynihan said the bank is preparing for a “mild recession” and a “downside scenario” where unemployment rises rapidly.
Moynihan’s pessimistic scenario shows unemployment rising to 5.5% early in 2023 and staying above 5% heading into 2024, CNBC reported Friday.
“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 an investor call, according to CNBC. (RELATED: Just About Every CEO Is Predicting An Economic Downturn In 2023: POLL)
Brian Moynihan says Bank of America expects ‘mild recession’ and is preparing for worse https://t.co/ttUNDRiPho
— CNBC (@CNBC) January 13, 2023
Moynihan’s prediction is similar to JPMorgan Chase’s 2023 forecast, which predicts unemployment to reach 4.9% by the end of 2023, CNBC reported. JPMorgan’s forecast is “now reflecting a mild recession in the central case,” the bank said after it beat fourth quarter earning estimates.
JPMorgan is preparing for a “mild recession” with over $1 billion set aside in case more borrowers default on their loans, according to the New York Times. Other large banks, such as Bank of America, have set aside hundreds of millions to prepare for more defaults, the outlet continued.
Bank of America’s earnings and revenue beat fourth quarter estimates, driving its shares up 2% Friday, CNBC reported. The bank had considerable growth in net interest income due to higher interest rates and a greater volume of loans, which made up for a decrease in fees from investment banking, according to the outlet.
Bank of America’s stock was up 4% prior to its fourth quarter earnings report Friday, CNBC reported.