Bank of America Reports on Economic Outlook and Mortgage Trends
During a recent earnings announcement, Bank of America (BofA) Chair and CEO Brian Moynihan highlighted a mixed economic landscape. He noted that while clients have displayed solid performance, there remains potential for shifts in the economy.
Economic Performance Insights
Moynihan observed that consumer spending has shown resilience alongside maintaining healthy credit quality. However, he cautioned that the evolving economy may bring challenges in the future. He stated, “there’s a lot that could potentially change given the uncertainty around the tariffs and other policies in the future path of the economy.” Despite these uncertainties, BofA’s research team currently predicts no recession in 2025.
Growth and Projections
While the GDP growth rates for 2025 have been revised downward, analysts do not anticipate interest rate cuts within that year. They expect that as inflation stabilizes, potential rate reductions might occur in 2026.
Mortgage Activity Overview
BofA reported funding of $4.5 billion in first-lien mortgages from January to March 2025, reflecting a 31.5% decrease from the previous quarter but a 30.9% increase compared to the same period last year. Additionally, the bank originated $2.2 billion in home equity loans, slightly down from $2.3 billion in Q4 2024 and up from $1.9 billion a year earlier.
Strategic Investments
According to CFO Alastair Borthwick, BofA acquired a high-quality residential mortgage portfolio valued at $8 billion during the first quarter. This strategic move aims to enhance customer relationships beyond traditional mortgages, with expected contributions of over $100 million in net interest income annually.
Mortgage-Backed Securities
As of March 31, the fair market value of BofA’s total mortgage-backed securities portfolio stood at $81 billion, an increase from $76.4 billion at the end of 2024.
Industry Comparisons
In comparison to other financial institutions, Citi originated $3 billion in mortgages during the same period, marking a 33% decrease quarter-over-quarter and a 10% decline year-on-year. Meanwhile, JPMorgan reported a mortgage volume of $9.4 billion, reflecting a 22% drop from the previous quarter but a substantial 42% rise compared to the same quarter last year. Wells Fargo also experienced a decline, with volume falling to $4.4 billion in Q1 2025, a decrease of 25% from the previous quarter but an increase of 26% annually.
Future Outlook
As nonbank mortgage lenders prepare to announce their Q1 earnings, the regulatory pressure faced by depository institutions since the 2008 financial crisis is a topic of discussion. Despite the uncertainties due to ongoing trade tensions, some banks are hopeful that a deregulatory agenda could provide relief.
Citi CEO Jane Fraser remarked on the current cautious sentiment in the market, stating, “The world is in a wait-and-see mode and is facing a more negative macro outlook than anyone had anticipated at the beginning of the year.” She also noted that regulatory and tax policies in the U.S. are expected to evolve significantly over the next year.
Fraser concluded by expressing a positive outlook towards potential changes in the banking industry that focus on material financial risks and bolster economic growth and client service.