Bank of America Insights: Consumer Resilience Amid Economic Uncertainty
Bank of America (BofA) has recently shared a positive outlook regarding its clientele’s financial behavior. Chair and CEO Brian Moynihan highlighted the continued strong performance of consumers, stating they are “showing resilience, continuing to spend and maintaining healthy credit quality.” Nevertheless, Moynihan expressed caution, acknowledging potential challenges posed by a shifting economic landscape.
Future Economic Predictions
In discussions with analysts, Moynihan remarked on the prevailing uncertainty related to tariffs and other economic policies. He indicated that significant changes could arise, but noted that BofA’s research team is not projecting a recession in 2025. Despite a revision in GDP growth rate expectations for that year, the bank forecasts no interest rate reductions, anticipating that any possible cuts might only emerge in 2026 as inflation stabilizes.
Mortgages and Financial Highlights
In the first quarter of 2025, BofA funded $4.5 billion in first-lien mortgages, marking a 31.5% downturn from the previous quarter’s $6.5 billion. However, this figure reflects a 30.9% increase when compared year-over-year with $3.4 billion funded in the first quarter of 2024. In the home equity lending sector, BofA originated $2.2 billion, slightly down from $2.3 billion in Q4 2024 but an improvement from $1.9 billion in the same quarter last year.
BofA’s Chief Financial Officer, Alastair Borthwick, revealed an important investment during this period—an $8 billion portfolio of residential mortgages, characterized as “high in quality.” This move is intended to enhance customer relationships beyond just the mortgage services offered and is projected to generate over $100 million in net interest income annually.
As of March 31, the bank’s total mortgage-backed securities portfolio was valued at approximately $81 billion, a rise from $76.4 billion at the end of 2024.
Industry Trends and Comparisons
A look at competitors reveals varying trends in mortgage origination for Q1 2025:
- Citi originated $3 billion, which was a 33% decline quarter-over-quarter and a 10% decline year-over-year.
- JPMorgan reported a mortgage volume of $9.4 billion, experiencing a 22% drop from the prior quarter yet up 42% from a year ago.
- Wells Fargo’s volume decreased to $4.4 billion, down 25% quarterly but still reflecting a 26% annual increase.
Further results from nonbank mortgage lenders, such as Rocket Mortgage and United Wholesale Mortgage, are anticipated in the upcoming weeks as they report their Q1 earnings.
Regulatory Landscape and Future Outlook
Since the 2008 financial crisis, banks have been under increasing regulatory scrutiny, which has influenced mortgage earnings. Current trade tensions bring about new uncertainties; however, some institutions foresee potential relief from a deregulatory agenda. Citi CEO Jane Fraser emphasized, “The world is in a wait-and-see mode” and acknowledged a more pessimistic macro outlook than originally expected at the year’s outset, noting that prolonged uncertainty can dampen consumer confidence.
Fraser also remarked on expected changes in regulation and tax policy in the U.S. over the next year, expressing optimism about discussions intended to align industry focus with major financial risks, which could support economic growth and enhance client service.