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BofA CEO sees early signals of tax-cut-driven loan growth

Bank of America Corp. spotted signs of commercial clients using credit lines and pursuing new loans to finance expansion plans following a federal tax cut late in 2017, the bank's chief executive said.

"You are starting to see what appears to be people investing in the business" on the heels of reform that lowered the top corporate tax rate from 35% to 21%, BofA Chairman and CEO Brian Moynihan said at a May 30 conference hosted by Sanford C. Bernstein.

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BofA CEO Brian Moynihan

For the first quarter, BofA said in April that its average business loans rose about 5.5% from a year earlier. Executives characterized that as decent, but they noted at the time that it trailed consumer loan growth of 8%. They also noted that business owners were still figuring out how lower tax rates could benefit them during the first quarter, and that stalled some growth plans.

But Moynihan said at the conference this week that most business owners have made sense of the tax changes and that at least some of them are beginning to borrow to finance growth. Lower taxes appear to be driving heightened customer activity for many businesses, he said, and owners of some of these businesses are using a combination of loans and their own tax savings to invest in expansion efforts to keep pace with higher demand for their products and services.

"The tax reform is in, and people are figuring out how to deploy it," Moynihan said.

He said that, with loan growth and higher interest rates in the wake of several Federal Reserve rate increases over the past year, BofA could boost its net interest income by about $2 billion in 2018 when compared with a year earlier.