Bank of America CEO Brian Moynihan said Friday that the bank is preparing for a potential recession in 2023, including a scenario where unemployment rises rapidly.
“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 a call with investors.
That pessimistic case, which is more negative than it was last quarter, calls for unemployment to rise to 5.5% early this year and remain at 5% or above through the end of 2024, Moynihan said.
Bank of America beat estimates on the top and bottom lines for its fourth quarterbut its $1.1 billion provision for credit losses was a sharp reversal from a negative number in that metric a year ago.
While the bank said net credit charge-offs are still below pre-Covid pandemic levels, outstanding balances on credit cards are up 14% year over year, and Moynihan said delinquencies are rising from their unusually low pandemic levels.
Shares of Bank of America were up 2.2% on Friday.