WEBVTT - BofA President of Retail Banking Holly O'Neill 0:00:02.400 --> 0:00:06.760 Bloomberg Audio Studios, podcasts, radio news. 0:00:07.000 --> 0:00:09.160 It really does all come down to the consumer and 0:00:09.200 --> 0:00:10.399 what the appetite there is. 0:00:10.520 --> 0:00:12.879 We want to really focus on the US consumer. 0:00:13.160 --> 0:00:16.479 Bank of America releasing its final Consumer Checkpoint report of 0:00:16.560 --> 0:00:20.160 the year saying there were no signs of consumer resilience waiting. 0:00:20.160 --> 0:00:23.759 In November, President of Retail Banking Holly O'Neal writing, spending 0:00:23.800 --> 0:00:28.160 momentum carried across all income cohorts through the gap between higher, 0:00:28.720 --> 0:00:32.559 middle and lower income household spending growth is narrowing. 0:00:32.600 --> 0:00:34.879 Holly joins us Now, Holly, wonderful to see. Thank you 0:00:34.880 --> 0:00:36.640 for big with us morning, Good morning. 0:00:37.120 --> 0:00:40.280 How much power is there left in bank accounts, in 0:00:40.560 --> 0:00:43.080 desire in some of the spending trends that you're seeing 0:00:43.120 --> 0:00:43.480 right now. 0:00:43.479 --> 0:00:47.519 Well, as you said, the consumer resilience is not waning. 0:00:47.640 --> 0:00:50.640 So across all of the metrics that we look at, 0:00:50.720 --> 0:00:55.520 they look really healthy and the dry powder is there. 0:00:55.560 --> 0:00:58.040 So when you look at the money they have and 0:00:58.040 --> 0:01:01.720 they're checking and savings accounts still significantly higher than it 0:01:01.840 --> 0:01:05.160 was even pre pandemic. Now we've seen that come down, 0:01:05.360 --> 0:01:08.360 but it's still higher, so they still have some cushion 0:01:08.400 --> 0:01:13.039 in there across all income cohorts, high, middle, low, and 0:01:13.120 --> 0:01:17.080 in particular the low income cohorts look even stronger when 0:01:17.120 --> 0:01:19.880 you look at it on a percentage basis. So from 0:01:19.880 --> 0:01:24.400 a liquidity perspective, they look strong. From a borrowing perspective, 0:01:24.440 --> 0:01:27.640 they also look strong. So they're borrowing in and around 0:01:27.800 --> 0:01:31.480 the same levels that they were pre pandemic when you 0:01:31.520 --> 0:01:34.320 look at our credit card data, so that looks good. 0:01:34.360 --> 0:01:39.080 They still have borrowing capacity. The credit environment from a 0:01:39.120 --> 0:01:44.080 bank perspective is fairly normalized. So I think the resilience 0:01:44.120 --> 0:01:48.480 of the consumer looks strong. And they're spending also looks good. 0:01:48.560 --> 0:01:51.120 And we're obviously in the peak spending period of the year, 0:01:51.520 --> 0:01:55.640 so their spending looks good. They're spending was up in November, 0:01:56.440 --> 0:01:59.720 and that matches our data of our surveys that we 0:01:59.760 --> 0:02:02.760 take pre holiday. What are you expecting to spend during 0:02:02.800 --> 0:02:03.400 the holidays? 0:02:03.440 --> 0:02:05.840 So the reason why I find this so interesting, first 0:02:05.840 --> 0:02:08.000 of all, is because this has been what has driven 0:02:08.400 --> 0:02:11.359 us exceptionalism is the envy of a lot of other countries, 0:02:11.440 --> 0:02:14.240 but also runs counter to what we're hearing from the 0:02:14.240 --> 0:02:15.960 guidance of certain retail companies. 0:02:16.000 --> 0:02:19.200 In particular, how do you swear that well? 0:02:19.240 --> 0:02:21.840 I think I think that the consumer. You do have 0:02:21.919 --> 0:02:26.240 difference in sentiment versus actual behavior. So we look at 0:02:26.240 --> 0:02:29.960 the actual behavior of the consumer. What are they spending, 0:02:30.120 --> 0:02:33.080 what are they spending on? So, as I said, spending 0:02:33.320 --> 0:02:37.480 is up holiday period, it's also up. They're expecting to 0:02:37.480 --> 0:02:42.560 spend twenty one dollars this holiday period. That's up seven percent. 0:02:43.280 --> 0:02:47.920 So you know, within that, we're seeing trades to more 0:02:47.960 --> 0:02:52.040 discount stores. So they're looking to stretch their dollar a 0:02:52.120 --> 0:02:55.920 little bit more, and they're seeing the benefit of some 0:02:56.400 --> 0:03:00.960 lowering prices. So in gas as an example, So in gas, 0:03:01.000 --> 0:03:04.080 we're saying a higher number of transactions, but the dollar 0:03:04.080 --> 0:03:06.280 amount is lower because the prices have come down. So 0:03:06.320 --> 0:03:11.200 they're making trades within their spending behavior and they're really 0:03:11.200 --> 0:03:12.720 making their dollar go further. 0:03:13.240 --> 0:03:17.120 How do you distinguish the sort of trading down whole scenario. 0:03:17.320 --> 0:03:20.200 How do you say that's stretching the dollar versus this 0:03:20.240 --> 0:03:23.080 is weakness and this is something that might show some cracks. 0:03:23.320 --> 0:03:27.080 I think, in my opinion, it's the consumer making good 0:03:27.200 --> 0:03:31.400 choices with the money they have to spend. They're very 0:03:31.400 --> 0:03:36.760 informed because the overall spending number is higher year over year, 0:03:37.200 --> 0:03:40.160 but then within that they're making trades and adjustments. At 0:03:40.200 --> 0:03:43.680 the same time, their liquidity levels are still strong and 0:03:43.720 --> 0:03:47.320 they still have borrowing capacity, So all of those things 0:03:47.400 --> 0:03:51.320 working together, I think are showing a good, strong, resilient. 0:03:50.880 --> 0:03:54.560 Consumer trend has also been this spend on services. Airlines 0:03:54.560 --> 0:03:58.120 spending still robust, cruises still robust. Do you see that 0:03:58.120 --> 0:03:59.960 continuing on or could we have any sort of rotate 0:04:00.360 --> 0:04:01.400 back into good spending. 0:04:01.760 --> 0:04:04.880 I think you could see that rotation. As you all know, 0:04:05.080 --> 0:04:08.320 during the pandemic, people really up the ante on the 0:04:08.400 --> 0:04:12.080 durable goods, the washers, the dryers. We still haven't seen 0:04:12.160 --> 0:04:15.600 that come back because those have a long shelf life, 0:04:15.200 --> 0:04:17.800 So I think as you see that mature, you could 0:04:17.839 --> 0:04:21.679 see it shift back. But the spending patterns really remain 0:04:21.800 --> 0:04:28.040 fairly consistent. Travel experiences, services, those are very strong. We 0:04:28.120 --> 0:04:31.480 are seeing in this holiday spend we are seeing electronics 0:04:31.480 --> 0:04:35.480 come back a little bit, so that's also, you know, 0:04:35.880 --> 0:04:37.800 a beginning trend. 0:04:37.839 --> 0:04:39.920 I would say, speaking of the holiday season, a lot 0:04:39.960 --> 0:04:41.840 of retail analysts have come on and said they're really 0:04:41.880 --> 0:04:44.400 folks in the fact that there's five less shopping days 0:04:44.680 --> 0:04:48.720 because it's a shrunk basically holiday season between Thanksgiving and Christmas. 0:04:48.800 --> 0:04:50.120 Do you see that having any. 0:04:49.920 --> 0:04:52.600 Impact at all on consumers willing to spend. 0:04:53.240 --> 0:04:56.440 Now, I think overall the consumer is going to spend 0:04:56.480 --> 0:04:59.599 for the holidays. You know, it is a more truncated period. 0:04:59.600 --> 0:05:01.720 But just for that when we when we look at 0:05:01.720 --> 0:05:05.599 the behaviors, so for the two weeks around Thanksgiving, and 0:05:05.640 --> 0:05:07.520 it was late this year, right, I think it's as 0:05:07.600 --> 0:05:10.880 late as it can get. We did see that spend 0:05:10.880 --> 0:05:12.919 go up, and so I think it's just going to 0:05:12.920 --> 0:05:14.200 be a more truncated period. 0:05:14.400 --> 0:05:16.200 What would you be looking for if you see any 0:05:16.240 --> 0:05:17.560 cracks of this resilience. 0:05:18.760 --> 0:05:24.880 I would look to their spending patterns first. Again, borrowing 0:05:25.000 --> 0:05:28.240 we will always look at as a bank. But the 0:05:28.640 --> 0:05:32.960 borrowing behaviors are still really strong. They're still paying credit 0:05:33.000 --> 0:05:35.599 cards off at a pace that's faster than it was 0:05:35.640 --> 0:05:38.919 pre pandemic. That's a really good sign. And then the 0:05:39.000 --> 0:05:42.400 liquidity in their their checking and their savings accounts, and 0:05:42.800 --> 0:05:45.240 you know, I think we've seen that really kind of 0:05:45.360 --> 0:05:48.080 flatten a little bit, and as we get into twenty 0:05:48.120 --> 0:05:50.640 twenty five, I would I would expect to see that 0:05:50.720 --> 0:05:51.719 start to grow again. 0:05:52.040 --> 0:05:54.800 I'm trying to build on what Amoru is talking about. 0:05:55.000 --> 0:05:57.520 There seems to be a disconnect and please help us 0:05:57.560 --> 0:06:00.360 with this, because on one hand, in this survey, you 0:06:00.440 --> 0:06:03.440 talk about the gap between the wealthiest and lower income 0:06:03.480 --> 0:06:05.839 cohorts narrowing actually marginally. 0:06:06.160 --> 0:06:09.080 You talk about robust firepower. 0:06:08.440 --> 0:06:11.040 In their bank accounts, You talk about ability and willingness 0:06:11.040 --> 0:06:13.679 to borrow, and then you talk about looking to stretch 0:06:13.720 --> 0:06:14.200 their dollar. 0:06:14.520 --> 0:06:16.640 This kind of behavior that you typically. 0:06:16.200 --> 0:06:18.599 See on the brink of something that does feel like, 0:06:18.880 --> 0:06:20.520 to Danny's point, a weakening. 0:06:21.040 --> 0:06:23.240 So what gives why aren't. 0:06:23.040 --> 0:06:27.880 People spending more in a traditional and free willing way 0:06:28.279 --> 0:06:30.520 when the data seems to suggest. 0:06:30.200 --> 0:06:31.480 It'd be in a position to do so. 0:06:32.040 --> 0:06:34.720 I think that we've seen a permanent shift in what 0:06:34.760 --> 0:06:39.080 the consumer wants as a liquidity position in their account, right. 0:06:39.160 --> 0:06:42.039 So I think they got used to that during the pandemic, 0:06:42.120 --> 0:06:45.560 saying I have more cushion in my bank account and 0:06:46.080 --> 0:06:49.159 I'm going to keep that there, and then they're making 0:06:49.200 --> 0:06:53.080 the trades into lower cost goods to make sure they 0:06:53.480 --> 0:06:56.240 keep that and maintain that level. So, you know, I 0:06:56.240 --> 0:06:59.360 think that's one of the trends. But I think it's 0:06:59.400 --> 0:07:03.880 the consumer who is very educated, very aware there are 0:07:03.880 --> 0:07:07.520 deals everywhere. They're in social media. We know that thirty 0:07:07.560 --> 0:07:10.280 percent of our clients are planning to buy in social 0:07:10.320 --> 0:07:13.880 media this year, which is very interesting, and so I 0:07:13.920 --> 0:07:17.239 think they're they're very aware and very informed and making choices. 0:07:17.680 --> 0:07:20.200 Is that the same thing as price fatigue, because we've 0:07:20.200 --> 0:07:22.840 heard that a lot among companies that you know, their margins, 0:07:22.840 --> 0:07:25.080 they can't keep expanding it because there's fears that people 0:07:25.080 --> 0:07:28.000 aren't willing to pay up. Is that the same different 0:07:28.000 --> 0:07:29.520 side of the same coin. 0:07:29.280 --> 0:07:32.440 I think it could be, yes, And I think you know, 0:07:32.520 --> 0:07:37.560 it's consumers again making very informed choices and taking control 0:07:37.840 --> 0:07:40.320 for themselves as to where they can spend their money, 0:07:40.360 --> 0:07:41.600 where they can budget. 0:07:42.000 --> 0:07:44.200 Hally O'Neal of Bank for America, thank you. This was 0:07:44.280 --> 0:07:47.320 really really interesting, Holly O'Neil. They're with U.