Bank of America touts readiness for 'whatever may be' ahead

Bank of America is not predicting the worst outcome for the U.S. economy, but it is preparing for it.

In a conference call detailing BofA's first quarter earnings, CEO Brian Moynihan said that as uncertainty around the Trump administration's trade policies continues, "periods of economic change" may be ahead. But the most likely scenario, he said, would be a slowdown in growth, not a contraction.

"Our research team, like many research teams … does not currently believe we'll see a recession in 2025," Moynihan said. "However, they've lowered their GDP growth rates for 2025."

While acknowledging that they lacked a "perfect crystal ball," Moynihan and the bank's chief financial officer, Alastair Borthwick, painted a baseline economic picture marked by more sluggish growth, slightly higher inflation and no interest rate cuts from the Federal Reserve.

While not catastrophic, the middling outlook was a far cry from the "solid economic environment" Borthwick had observed during BofA's last earnings call in January. The bank is rigorously stress-testing for other scenarios, he said, including three on the downside of the baseline and only one on the upside.

As part of its earnings materials, BofA presented a detailed slide on how its business today compares to where it was at two other moments in history: the beginning of the COVID-19 pandemic and the height of the Great Recession. The chart showed a more diversified portfolio in 2025, with less concentration in consumer loans, more liquidity and less exposure to consumer credit and home equity.

One analyst asked why this comparison was necessary.

"Why we're trying to give you reassurances … is because it's a source of strength for us," Moynihan answered. "We've been working at that hard, to ensure that as we go through a crisis — and we've had a couple bumps in the road — as we go through a more traditional economic downturn, we will be in great shape."

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As for the first quarter of 2025, BofA's earnings exceeded Wall Street's expectations. Earnings per share came out to $0.90, beating analysts' average estimate of $0.82, according to S&P. Revenue was $27.4 billion, surpassing estimates of $26.9 billion, per S&P.

Net income came out to $7.4 billion, an 11% jump from the first quarter of 2024. The bank attributed the increase to higher net interest income, which grew 3% year-over-year, and greater fee income from its wealth management business, which leapt up 15%.

The results left some analysts pleased, if not blown away.

"Bottom line, BofA is fine and plenty consistent," wrote Glenn Schorr, senior managing director at Evercore ISI. "Stock is cheap after a bout of underperformance, but results are fine, not stellar in our opinion."

BofA's non-interest expenses rose to $17.8 billion in the first quarter, up 3.5% from the prior year. The increase was partially driven by higher litigation expenses, which Borthwick attributed to "a recent decision in a long-running matter."

Borthwick did not elaborate, but he appeared to be referring to a federal court decision that was unsealed on Monday. In that ruling, which was reached on March 31, a U.S. district judge in Washington, D.C. found that BofA underpaid its deposit insurance assessments to the Federal Deposit Insurance Corp. in 2013 and 2014.

The FDIC had accused the bank of falling short in these payments by $1.12 billion, but the court ultimately decided — after eight years of litigation — that BofA only owed about $540 million.

"We are pleased the judge has ruled and have reserves reflecting the decision," Bill Halldin, a BofA spokesperson, told American Banker.

In the first quarter, the bank reported a reserve build of $30 million for its consumer banking arm, up from $6 million in last year's first quarter.

On the earnings call, Moynihan cited the reserve build as an example of BofA's discipline, which he said would help protect clients in the event of a recession.

"We gave you the latter part of this presentation to show you our multifarious loan book and how that diversity … holds us in good stead," he said. "In addition, we talked about how we're well reserved heading into whatever may be in front of us."