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BofA (BAC) CFO Optimistic on US Economy, Confirms Q3 NII View

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Once again, Bank of America’s (BAC - Free Report) CFO, Alastair Borthwick, has reiterated the third-quarter 2023 net interest income (“NII”) guidance. Yesterday, at the BofA Securities 28th Annual Financials CEO Conference, Borthwick said that the company’s third-quarter NII is expected to be $14.2-$14.3 billion.

A few days ago, at the Barclays Global Financial Services Conference, Borthwick provided investment banking (“IB”) guidance for the third quarter and said that the company’s Global Markets income will likely rise in the low-single-digit range on a year-over-year basis.

Also, Borthwick had reiterated the company’s NII and expense guidance.

BofA’s fourth-quarter NII is expected to be $14 billion. NII (FTE) for 2023 is expected to be a little above $57 billion, which indicates year-over-year growth of more than 8%.

Non-interest expenses in the third and fourth quarters of 2023 are expected to be $15.8 billion and $15.6 billion, respectively.

The latest reiteration comes as Borthwick feels that the robust consumer spending witnessed in the United States has reduced the likelihood of a full-fledged recession. Borthwick now has a rather optimistic view of the U.S. economy.

Borthwick said that the first indicator that we should look at while understanding the scenario of the U.S. economy should be the consumer because consumers comprise 60-70% of the economy.

Consumer spending has increased 4% year over year, which, Borthwick believes, makes it challenging to predict an impending recession.

Credit and debit card payments in the United States have been relatively high as consumers are consistently spending on goods and services.

Borthwick stated, “Right now, when we look at our credit card and our debit card payments, people buying things in there every day, we can still see elevated consumer buying behavior. It’s difficult to see a U.S. recession when the consumer is spending 4% more year-over-year. So you can sort of see why people talk about pushing out the recession longer in the United States.”

In addition to this, Borthwick said that the quality of consumer assets remains strong.

He commented, “When we look at the consumer asset quality, it's also very, very strong. People will talk about this idea of credit quality normalizing. They're really talking about in the States, normalizing relative to pre-pandemic because during the pandemic, the asset quality was really unprecedented.”

BofA’s observations about the current situation of the U.S. economy reinforce the optimistic view.

In the past six months, shares of BAC have gained 3.3% compared with the industry’s rise of 7.5%.

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Currently, BofA carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Competitive Landscape

Banking rival JPMorgan’s (JPM - Free Report) NII and expense guidance have also been reiterated by the company’s CEO, Jamie Dimon. At the Barclays Global Financial Services Conference, Dimon said, “NII, I think we have given your numbers as they haven't really changed that much, you have them, right, whatever they are, they're the same as they were before.”

JPM projects NII of $87 billion for this year, suggesting 30% year-over-year growth. Its expense guidance stands at $84.5 billion for 2023.

Apart from this, Truist Financial (TFC - Free Report) reaffirmed its non-interest expense outlook.

TFC anticipates third-quarter adjusted expenses to be flat or down 1% sequentially. For the full year, the metric is expected to grow 7%.

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