Bank of America CEO: ‘Consumers are Still Solidly in the Game’

Consumers are still spending, Bank of America’s earnings showed Tuesday (April 15), despite the volatility of what CEO Brian Moynihan termed a “changing economy.”  

The supplementals revealed that credit and debit spend was up 4%, while the number of transactions gained 2%, to $228 billion.  

Bank of America stressed digital adoption trends, where digital sales as a percentage of total sales stood at 65% in the most recent quarter to $1.9 billion, up from the 53% and $1.7 billion seen in the same period of 2022.

Zelle payments were $130 billion in volume, up from $106 billion in the year-ago first quarter.

Net charge-offs, meanwhile, were flat, at $1.5 billion, as compared to the fourth quarter of last year.

Investors sent the shares 3% higher at the start of trading on Tuesday.

During his comments to analysts on the earnings call, Moynihan said: “Organic growth remains strong across the businesses” as the bank added new checking accounts, which grew by 250,000 accounts in the quarter.

And with a nod to the digital engagement, Moynihan said that its digital assistant Erica has surpassed more than 2.7 billion interactions since inception in 2018.

“Transactions sent through Zelle at Bank of America are not only three times the number of checks written by our Bank of American customers,” he said, “but they are also 1.3 times the number of checks written plus the number of cash transactions taking money out of the ATMs.”

He said later in the call that at a macro level, “there’s a lot that could potentially change given the uncertainty around the tariffs and other policies in the future path of the economy … but going more to what our customer data shows, it shows that the money moving across all our consumer spending methods, debit credit cards, ACH checks written, Zelle, etc. All that aggregate [data] shows a group about 4.4% pace in the first quarter … That pace has also continued through April. We note that some retailers may say that their sales are slow and others are picking up, and it really reflects the change in consumer spending behavior. But in the aggregate, the consumer keeps pushing money into the economy.”

CFO Alastair Borthwick said on the call: “We already saw modestly better deposit growth in the first quarter than we expected … Consumer net charge-offs were … consistent with the past few quarters,” as 90% of the $1.1 billion in consumer net charge-offs were tied to credit cards. Consumer banking deposits continued to increase from their mid August low, said the CFO, and now stand at $972 billion, up from the recent $928 billion.

Moynihan noted on the call that the card net charge-off ratio of 4% comes against a backdrop where the average cardholder and borrower FICO score is 777. About 12% of the portfolio is exposed to borrowers with a FICO score below 660, he said.

Asked on the conference call about the state of consumer spending subsequent to the quarter’s end, management said on the call that through the first few weeks of April, spending growth has been running at 5%.

“Consumers are still solidly in the game,” Moynihan said.

On the commercial side of the business, commercial loans were flat from the end of the year at $196 billion.

Moynihan stated that businesses are “basically sanguine on the current environment, but they’re worried about how [tariffs] will affect their businesses and where they should invest. And I think that’s slowing down some of their decision paths right now because they’re trying to figure out ‘for my goods and services, will I be able to pass through the price? Do I need this change my business plans in terms of growth? Should I buy that piece of equipment?’ That’s why line usage has been relatively muted still, and we continue to try to grow it.”  

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