Bank of America CEO on the state of inflation & U.S. economy

In a new interview with Yahoo Finance’s Julie Hyman, Bank of America CEO Brian Moynihan breaks down various aspects of the U.S. economy and how it’s impacting every citizen.

Video transcript

JULIE HYMAN: Oddly, you said in a recent interview that inflation is clearly not temporary. And we could, of course, see the Fed starting to raise rates perhaps as early as next year, by the end of next year perhaps. So, on balance, as you think about inflation, is it good for Bank of America? How concerned are you that it might prevent a bigger increase in consumer spending, for example? How are you thinking about inflation more broadly?

BRIAN MOYNIHAN: Good morning, Julie. You know, the question is, why is the inflation occurring? And if inflation is occurring because there's a strong economy and growing fast, which is what we have now, that means that it's occurring for the right reasons, so to speak. And rates have to rise to offset that. But it could also occur in odd situations, stagflation, things like that, which are much more detrimental to everything.

So, you have to step back and think about our company. We have $2 trillion in deposits. We have a trillion in our consumer business alone. Half of that's checking accounts, which are non-interest-bearing checking accounts in any market. So as rates rise, of course, we'll make more money because, frankly, as rates fell, we lost $2 billion a quarter because the value of lending those deposits out to our clients to help them run their businesses and do things is less.

So it's a pretty straightforward equation as to why you make more money as rates rise. It's not what determined in the financial markets as asset sensitivity. It's actually reliability insensitive because we have so much non-interest-bearing deposits. And then I think if you want to talk broader about the economy, what we're seeing in the company is pretty interesting right now.

JULIE HYMAN: Yeah, so let's talk about that because you guys have customers in half of all the households in the US. You're the top small business lender. So what are you hearing from your customers about how they're feeling right now effectively about the economy?

BRIAN MOYNIHAN: So when we look at our customers, we have broad American consumers, we have wealthy American consumers, and then we have companies from very small businesses, the largest companies in the world. And we have investors that work with our markets team. But focused on the consumer side, a lot of people focus on credit card and debit card payments.

But that's only about 25% of all the ways consumers spend money. If you actually look across how consumers spend money, writing checks, taking money out of the ATM, you know, Zelle payments, ACH payments, wires, everything, that's for us, so far through October year to date of '21, is about $2.8 trillion of activity. And it's up 20% over 2020 and 20 plus percent, like 23%, over 2019. And so that's a very strong growth rate, the strongest we've seen in the last many, many years. We track this. Every Friday, we get this report.

And so the consumers are out spending money, and it changes in ebbs and flows from different times. Like, travel's up fairly significant, domestic travel, obviously. You're seeing that happen. Whereas eating in restaurants ebbs and flows depending on how things are going in a particular community relative the COVID virus.

But all in all, the simple fact is the economy is as big as it was in 2019 nominally. It's growing-- predicted to grow at to three times the rate it was predicted to grow then. Consumers are spending at, really, twice the growth rate in our consumers, which is a broad base.

And then the question is, is it all because of the stimulus in their money? If you actually look at our consumer checking accounts, for the last six months, people have average deposits of $10,000, even $15,000, and less. Their deposit balances have grown for the last six months each month. And then even in the last month from August to September, it grew by a couple percent, which means even after stimulus largely stopped, you're still seeing their accounts grow, which means they're accumulating cash in excess of their spending.

And so, the American consumer's in very good shape. Delinquencies on the credit side are down. Credit markets are wide open for companies and individuals. And it's a pretty strong backbone to economy, which is driven by the consumer. Now we have shortages of things that could affect it. Inflation, as you said, and consumer expectations of inflation could affect it. There's a lot of things you can always look at and we get paid to look at and say what could go wrong.

But right now, you fairly straightforward have a strong consumer base in America that unemployment's down to 4.8 and continue to come down. New claims are down to multi-- pre-pandemic lows, in other words, during the pandemic, the lowest level moving towards pre-pandemic levels. It's a fairly good picture, as long as the COVID virus stays in check.