Morgan Stanley CEO sees 50% chance of US recession

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NEW YORK, June 13 (Reuters) – There is a 50% chance that the U.S. economy will slip into recession, although a downturn is unlikely to be severe, the CEO of Morgan Stanley (MS. N), James Gorman, warning of a “jolt”. “Roll forward for investors.

“It’s possible, probably 50-50 now,” Gorman told a conference hosted by the Wall Street bank, revising his own forecast from last month when he told investors the likelihood of a recession was less than 50%. Read more

“It’s going to be bumpy. People’s 401(K) plans are going to be down this year,” he added, referring to US retirement plans. “But it’s unlikely that at this point we’ll go into a deep or long recession.”

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The benchmark S&P 500 (.SPX) looked set to confirm a bear market on Monday after falling more than 20% from its January 3 closing high on growing investor fears of a possible recession.

Executives speaking at a Morgan Stanley financial industry conference said U.S. consumers and businesses remain financially healthy, which will help the economy rebound from any contractions and insulate banks from the impact.

Bank of America Corp (BAC.N) Chief Financial Officer Alastair Borthwick said earlier in the day that his bank’s loan portfolio did not yet show signs of an impending recession.

“There’s this question of what’s going to happen in the future, and there’s what we’re seeing right now. And what we’re seeing right now, the credit is in great shape,” Borthwick said when asked about asset quality.

Bank of America, the second-largest U.S. bank by assets, said customer spending rose 9% in June from a year ago, while credit card balances remained lower than those at before the pandemic. Those are two signs consumers are healthy and not “overextended,” Borthwick said.

The bank’s corporate clients continue to borrow and credit quality in the travel, restaurant and hospitality sectors is improving, he added.

“Overall, we’re seeing reasonably good loan growth right now,” he said, adding that growth was expected in the “high numbers.”

Borthwick’s comments contrasted with those of JPMorgan (JPM.N) chief executive Jamie Dimon earlier this month.

Dimon said inflation, the conflict in Ukraine and other challenges facing the economy looked like a “hurricane” to come. Read more

Borthwick and Gorman both described the investment banking environment as challenging as fewer companies went public in the volatile market.

Borthwick warned that Bank of America expects to report a writedown of $100 million to $150 million on its leveraged finance portfolio this quarter.

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Additional reporting by Carolina Mandl and Sinead Carew; edited by Jonathan Oatis, Michelle Price and Deepa Babington

Our standards: The Thomson Reuters Trust Principles.

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