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(Bloomberg) — Bank of America Corp. — whose consumer division is its biggest profit engine — said consumers are keeping up with their bills and continuing to spend on discretionary items such as travel and entertainment, despite fears that price pressures would weigh on US households.
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That business, which posted nearly $3.3 billion in profit in the second quarter, gives the company a bird’s eye view into the health of the US economy through its nearly 39 million checking accounts.
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“The US economy has proved more durable than expected, supported by the strong consumer, ongoing AI-driven investments across the board and easing energy costs,” Chief Executive Officer Brian Moynihan said during a conference call with analysts, though he warned “inflation and tighter monetary policy remain key risks.”
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It’s a stark contrast to other parts of the US economy, where companies have warned that consumers are starting to feel the pinch. Earlier this month, PepsiCo Inc. said consumers pulled back on buying snacks as gas prices rose.
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Spending on gas drove a chunk of the increase for Bank of America in the first half of this year, with that measure climbing 14% in that time period, according to the bank’s presentation. That made it the largest segment of credit and debit spending, followed by entertainment and travel, which were also up.
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Despite the higher costs of essential goods, bank executives said consumers were holding up, boding well for the bank’s division that is focused on an ambitious goal to lift annual net income. Last year, the unit, run by Holly O’Neill, said it aims to generate annual profit of $20 billion by the end of the decade. At the same time, it’s seeking to keep a lid on spending to bring its efficiency ratio down.
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“Consumers remain resilient as average deposit, investment balances and spending all showed linked-quarter increases,” Chief Financial Officer Alastair Borthwick said on the call. In that segment, he said, “credit quality remains strong and in line with expectations.”
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