Bank of America reports good results from its retail banking sector: what this means

We explain what Bank of America’s good banking results mean and what the figures from this financial institution tell us about the chances of a recession occurring soon in the US.

Bank of America, the second largest bank in the United States (only behind Chase Bank) and one of the most important financial institutions in the country, reported good results from its retail sector, as spokesmen pointed out that consumer deposits grew 1%, while credit card spending grew 13%.

Alastair Borthwick, chief financial officer of Bank of America, explained to the press that the American consumer seems to be in great shape, as “they remain resilient and continue to spend at a high rate. They are also paying off their outstanding loan balances at high rates, and still have the ability to borrow.” This was reported by The New York Times.

Despite these results, Bank of America increased its reserves for the coverage of bad loans by adding $378,000,000 dollars, a movement that is already part of a trend of US banks and that, in the opinion of financial analysts, could mean that financial institutions are preparing for a possible scenario of massive defaults in the near future.

However, It seems to brush away these fears by pointing out that Bank of America’s move is taking place because the bank’s lending capacity appears to have grown substantially, rather than because the prospects for repayment of the financing have dimmed.

Not all good news for Bank of America

Despite the good results obtained by Bank of America’s retail sector, it is not all good news. Strictly speaking, Bank of America’s profit was down 8% from a year ago, posting revenue of $7.1 billion during the third quarter of 2022.

On the other hand, the investment banking division posted a 4% loss from stock trading (not too surprising considering the US financial market recently went through what was dubbed its worst month of the year), and income from bank investment fees fell 46%.

However, it should be noted that income from bonds, commodities and other financial products increased by 27%.

Likewise, Borthwick indicated that some of Bank of America’s international clients have been affected by the negative impact that foreign currencies have suffered recently.

What do these Bank of America results mean for you?

The Bank of America results reveal that US consumers have not yet been hit by a recession, allaying some of the fears by financial analysts who have warned that the country’s economy could be slowing down progressively.

However, one fact points to what could be the beginning of a trend: the growth rate of consumer spending only increased by 9% compared to 12% registered at the beginning of this year.

Is this enough to signal that a recession has begun in the United States? Not necessarily, as Bank of America has emphasized the good health of its consumers despite the increase in interest rates by the Federal Reserve.