BofA projects 'resilient' economy but also higher inflation

• Key Insight: Since the beginning of the war in Iran, Bank of America has raised its projection for inflation over the rest of the year.
• Supporting Data: The day before the war started, the bank was still predicting average inflation for 2026 to be 2.8%. By Wednesday, it had increased that estimate to 3.5%.
• Expert Quote: "In our view, while those risks are out there, the macro backdrop remains constructive," said BofA CEO Brian Moynihan.

As Bank of America posted robust first-quarter earnings on Wednesday, its executives were bullish about the U.S. economy's resilience. But since the start of the war with Iran, the bank has made a significant upward revision in its inflation forecast.

A slide from BofA's earnings presentation showed that the country's second-largest bank expects U.S. inflation to rise substantially this year before falling next year.

The average yearly inflation rate in 2025, as measured by the Consumer Price Index, was 2.7%. For the full year of 2026, BofA expects that number to jump to 3.5%, before sharply declining to 2.4% in 2027.

"When you look at the inflation … you can see that the projection is for it to remain elevated in '26 and into '27," CEO Brian Moynihan said during the earnings call on Wednesday.

The 2026 projection also marks an increase in BofA's own expectations. On Feb. 27, the bank was still projecting U.S. inflation for the full year to be 2.8%, according to a chart shared with American Banker.

The date of that chart is important. The next day, Feb. 28, the U.S. and Israel launched their ongoing war on Iran. The conflict, which has largely closed the Strait of Hormuz to oil shipments, has caused a spike in energy prices and many related costs. Last week, new data showed a sizable jump in U.S. inflation in March, with the year-over-year change in CPI rising to 3.3%.

On Wednesday, BofA's leaders acknowledged the connection between the war and rising prices, but emphasized that the bank's clients — and the economy — can handle it.

"We … are mindful of all the risk out there: the ongoing conflicts in the Middle East, including implications for the energy market, inflation and growth," Moynihan said. "To date, these impacts have been measured and absorbed by the economies here and around the world."

As evidence of that durability, Moynihan pointed to two other charts in the bank's presentation. One showed total payments spending by Bank of America customers, which increased by 5% in 2025. The other chart showed total debit and credit card spending, which rose 6%.

"When you look on the right, you can see where the resilience comes from," Moynihan said. "The U.S. consumer continues to spend through all its different platforms here at Bank of America."

For U.S. gross domestic product, BofA's economists projected middling but stable growth — 2.3% in 2026 and 2.2% in 2027. And with tailwinds from loosening bank regulations, the AI boom and other factors, the bank's executives are optimistic about the overall environment.

"In our view, while those risks are out there, the macro backdrop remains constructive," Moynihan said.

'Every segment grew earnings'

BofA rose above Wall Street's expectations in the first quarter of 2026, lifted by growing fee income and equities revenue.

In the three months that ended March 31, earnings per share for the $3.5 trillion-asset bank were $1.11, beating analysts' consensus estimate of $1.02, according to S&P. Net income reached $8.6 billion, up 17% from last year's first quarter and beating estimates of $7.6 billion.

"The biggest highlight I can provide you is … that every segment of the company contributed to our year-over-year growth," Moynihan said. "Every segment grew revenue, every segment grew earnings."

BofA's revenue in the first quarter was $30.3 billion, surpassing analysts' forecasts of $29.9 billion, per S&P, and marking a 7% increase year over year. Moynihan partly attributed that growth to "better than expected" net interest income, which rose 9% to $15.7 billion.

Another contributor was fee income. In BofA's Global Wealth and Investment Management unit, asset management fees reached $4.2 billion, a 15% increase from the prior year. And for Global Banking, investment banking fees totaled $1.8 billion, up 21% year over year.

Equities were also a highlight. In the bank's Global Markets division, equities revenue climbed 30% from last year, reaching $2.84 billion. BofA said the jump was "driven by increased client activity."

"Overall, this looks like a broad-based beat from Bank of America, with net interest income, fees, and credit costs all contributing to the outperformance," Scott Siefers, an analyst at Piper Sandler, wrote in a research note.

The earnings come five months after BofA's first investor day in 15 years, during which the bank set several slightly more ambitious medium-term financial targets for its future.

At that event, BofA set a 16% to 18% goal for return on tangible common equity, or ROTCE, within the next three-to-five years, a hair above the bank's usual mid-teens guidance.

On Wednesday, the bank appeared to have reached the low end of that goal. In the first quarter, ROTCE reached 16%, up from 13.97% one year before.

"We're obviously gratified with 16%," said Chief Financial Officer Alastair Borthwick. "But the key for us as a management team is just to keep moving up the ladder. … Every quarter will be different. We've just got to keep making progress towards our goal."