Bank loans

Bank of America chief financial officer says spending remains high as bank lending increases

(Bloomberg) – Borrowing and spending by Bank of America Corp. customers. remain strong despite economic headwinds, said chief financial officer Alastair Borthwick.

“The consumer is still spending quite vigorously” and corporate balance sheets are healthy, Borthwick said Monday at Morgan Stanley’s U.S. Financial Conference. Spending rose 9% in June from a year earlier as sales continued to grow this quarter, he said.

The comments echo Chief Executive Brian Moynihan’s previous statements that US consumers are increasing spending and paying off credit card balances, despite inflation. Borthwick said he doesn’t see a recession on the horizon, contrary to some of the predictions of other Wall Street executives. Jamie Dimon warned investors earlier this month to prepare for an economic “hurricane” as the economy stumbles.

“Credit is in great shape” and credit card spending is below average at the bank, which Borthwick says is another sign of consumer strength. When it comes to savings and lending, mortgage lending isn’t necessarily accelerating, but “keeping pace” and growing over time at Bank of America, he said.

Read more: BofA’s Moynihan says consumers are holding up well against inflation

The Charlotte, North Carolina-based bank is also seeing strength in borrowing and is on track for single-digit loan growth, Borthwick said. Wealth management lending is growing, which should be an “increase” in net interest income to “offset some of the fees,” he said.

Borthwick said with continued loan growth, the bank has positioned its balance sheet to be nimble given the expectation of higher interest rates. “We’re not necessarily looking for duration risk or credit risk,” he said, adding that the bank wanted to “have a lot of flexibility.”

The bank’s trading business has also remained stable despite recent market volatility and is on track for a 10% to 16% increase from a year ago, according to Borthwick. Meanwhile, the investment banking environment was “challenging” this quarter, with the company looking to keep fees between $1 billion and $1.25 billion. “We’ve probably taken a small market share, but it’s really low,” he said.

Bank of America expects to receive between $100 million and $150 million from its leveraged finance unit, which takes riskier positions on behalf of its clients. This depreciation will affect the bank’s other income, according to Borthwick. “We’re keeping an eye on that.”

(Updates with additional comments from the third paragraph.)

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