Updates - Inflation

BofA’s Moynihan Says Consumers Still Strong Even With High Rates

Katherine Doherty
MAY 13, 2024

Bank of America Corp. Chief Executive Officer Brian Moynihan said US consumers, helped by wage growth, remain in good shape even amid elevated interest rates, and that businesses are once again looking at mergers and acquisitions.

Consumer spending has climbed 3% to 4% in May from a year ago, Moynihan said Monday. That increase is consistent with a slower-growth, lower-inflation environment, but still a positive for the US economy, with people continuing to spend more, he said.

“It shows you the resilience of the American consumer,” Moynihan said in a Bloomberg Television interview during a summit on French business in Versailles. “There’s a thousand things that could go wrong tomorrow, but right now everything is in pretty good shape.”

Moynihan says Americans are getting used to high interest rates, but people are making adjustments.

At Bank of America, net interest income, a key source of revenue for the company, fell 2.9% to $14 billion in the first quarter of this year. With interest rates remaining elevated and investors awaiting expected cuts by the Federal Reserve, lending and consumer spending have slowed. High interest rates have been a drag for earnings at Bank of America, which had piled into long-dated Treasuries and mortgage bonds in years when rates were lower.

Companies that slammed the brakes on takeovers when the Fed initially raised rates have resumed the hunt for acquisitions as financing costs become more predictable and the economy stays robust. Investment banks including Evercore Inc., Lazard Inc. and Moelis & Co. have said in recent weeks that they’re poised to benefit from an increase in M&A.

Investment banking activity is very high, with “a lot of conversations, a lot of deals being signed up,” Moynihan said Monday. But concerns still surround timing, pricing and certainty of transactions, he said. “Large companies can hang on longer because they have more resiliency, especially if they are buying a smaller company. But a company that’s buying a company that might be 30% to 40% of the size, they have to be very careful, and they are cautious.”

Moynihan, one of the longest-serving heads of a large US bank, has signaled his interest in staying on for years to come. He was promoted to CEO of Bank of America in 2010 in the wake of the global financial crisis, and has steered the lender through the pandemic and last year’s turmoil in the banking industry.

When asked about the possibility of taking on a role in the US government, such as treasury secretary, Moynihan said he was committed to his role leading the second-largest US bank.

“I have the greatest job in the world, and I’ve got a lot of work to do for Bank of America,” he said. “I’ll let someone else have that honor.”