Feb 14 (Reuters) – Companies and households are feeling better about the economy despite recession predictions, the heads of top U.S. banks said Tuesday, although the elevated economic uncertainty is still seeing banks tightly control costs and cut staff numbers.
Goldman Sachs Group Inc. (GS.N) Chief Executive Officer David Solomon said sentiment among business leaders has improved. His counterpart at Bank of America Corp (BAC.N), Brian Moynihan, cited resilient consumer finances and spending as positive signs. But both leaders cited risks to the economy, including inflation, and said they would keep a lid on hiring this year to constrain costs.
“While it’s still very, very uncertain, the consensus has shifted to be a little bit more dovish in the CEO community that we can navigate through this in the United States, with a softer economic landing than what people would have expected six months ago,” Solomon told investors at a conference in Florida.
At a separate event, Bank of America’s CEO reiterated what he has been saying for months – that consumer spending remains robust and is underpinning the economy.
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“Consumers remain very solid,” Moynihan told investors in New York. “Their balances are strong, their credit availability is strong, and the spending activity in January actually picked up a little bit.”
The comments came as latest data showed U.S consumer prices accelerated in January, but the annual increase was the smallest since late 2021, pointing to a continued slowdown in inflation and likely keeping the Federal Reserve on a moderate interest rate hiking path.
JPMorgan Chase & Co (JPM.N) CFO Jeremy Barnum told an investor conference, “we’ve got another couple of hikes in the forward. So at this point, it looks like peak (Fed) funds (rate) at something like 5.5%.”
Solomon said inflation is still “sticky” and a big headwind for growth and for corporate investment.
Despite some easing concern about an economic slowdown, the bank chiefs said they were managing headcount to constrain costs. Goldman cut about 3,200 staff, or 6% of its workforce, last month.
“We are in a position to lower the headcount,” Solomon said. “We’ve taken some action — we have a much tighter hiring plan in 2023,” which entails less hiring, he said.
Bank of America will also manage its staffing through attrition. It aims to have a workforce of about 213,000 to 214,000 in the next three to four months, Moynihan said, down from 216,823 at the end of 2022.
Wells Fargo & Co (WFC.N) Chief Financial Officer Mike Santomassimo told the Florida conference that “things are going to continue to get a little worse” when asked about the potential for a recession. While consumer spending remains healthy, credit card delinquencies are increasing, and growth in Wells Fargo’s commercial bank is moderating, he said.
Clients continue to be worried about interest rates, inflation, geopolitics and “the potential prospects of a recession and how that impacts their business,” said Shahmir Khaliq, global head of treasury and trade solutions at Citigroup Inc.
A KBW index of bank stocks (.BKX) was down 0.3% in afternoon trade on Tuesday after climbing nearly 12.3% so far this year.
Reporting by Saeed Azhar and Lananh Nguyen in New York and Niket Nishant and Mehnaz Yasmin in Bengaluru; Editing by Saumyadeb Chakrabarty and Nick Zieminski