U.S. CFOs Remain Cautious About the Economy in Bank of America Merrill Lynch 2013 CFO Outlook

Fri Feb 8, 2013 10:00am EST

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Economy Gets Higher Scores Than in 2012 Survey, but Executives Still Concerned
About Growth
CHARLOTTE, N.C.--(Business Wire)--
Financial executives at U.S. companies continue to be concerned about the
economy, with only two out of five executives expecting growth in 2013,
according to the Bank of America Merrill Lynch 2013 CFO Outlook. 

The 602 executives who participated in the 15th annual survey gave the U.S.
economy an average score of 49 out of 100, up from 44 in the 2012 report. CFOs
gave the global economy a score of 45, up from 43 a year ago. 

Optimism about economic growth remained muted, with only 39 percent of CFOs
predicting expansion in 2013, compared with 38 percent last year. Perhaps more
telling, 24 percent of executives said they expect the economy to contract this
year, up significantly from 11 percent in 2012. 

"It is clear that uncertainty continues to linger among CFOs, which is
understandable given the broader economic issues both in the U.S. and overseas,"
said Alastair Borthwick, head of Global Commercial Banking at Bank of America
Merrill Lynch. "Until they see solid evidence of stability, CFOs will be guarded
in their optimism and growth plans. Expansion still is possible but may be
limited in the short term to certain industries and markets." 

Despite concerns about contraction, most CFOs expect their companies to avoid
layoffs in 2013. Only 8 percent predicted a reduction in workforce, compared
with 7 percent last year. Meanwhile, 48 percent said they expect to maintain the
current number of employees, while 45 percent said they expected to hire
employees. Both responses are similar to last year`s survey. 

In Oregon, retailer Coastal Farm & Ranch is exploring the possibility of adding
to its 12 stores this year. If that expansion happens, the company would need to
hire more employees to meet increased customer demand. "With more homeowners
choosing to grow their own produce or raise chickens and other animals for food,
we`ve seen more interest in our products and services," said Buzz Wheeler,
Coastal Farm & Ranch`s chief executive. "Many people still may be worried about
the overall economy, but we`re optimistic this year will bring plenty of
opportunities." 

One area of significant growth in the latest CFO Outlook was international
activity, with 73 percent of CFOs saying their companies are involved in
non-U.S. markets. That`s up from 54 percent in the previous annual survey, and
executives reported increased buying from non-U.S. markets (62 percent vs. 47
percent last year), selling to non-U.S. markets (55 percent vs. 34 percent) and
operations in non-U.S. markets (30 percent vs. 15 percent). 

"Companies across the U.S. are doing more business around the world, which adds
another dimension to their financial needs," Borthwick said. "We`ve seen this
expansion and diversification with many Bank of America Merrill Lynch clients,
who value their access to our expertise in providing global solutions at the
local level." 

Other notable findings in the 2013 CFO Outlook:

* Among potential impacts on the U.S. economy, the effectiveness of U.S.
government was listed as a concern by 64 percent of executives. In addition, 63
percent listed the U.S. budget deficit and 62 percent listed healthcare costs. 
* The top financial concern for CFOs` own companies was healthcare costs, chosen
by 58 percent. That was followed by revenue growth at 43 percent and cash flow
and corporate tax rates, both at 34 percent. 
* Regarding revenues and profits, 56 percent of CFOs expect revenue growth -
same as last year - while 40 percent anticipate a growth in profit margin, down
slightly from 41 percent last year. 
* Only 17 percent of CFOs expect their companies` borrowing needs to increase in
2013, down from 28 percent in 2012, while 17 percent expect those needs to
decrease, up from 12 percent. 
* Regarding financing, 19 percent of executives expect the cost of capital to
increase, down from 21 percent last year. 
* M&A activity could pick up slightly, with 22 percent of CFOs saying they
expect to participate in a merger or acquisition in 2013, up from 18 percent a
year ago. 
* CFOs increasingly expect labor costs to rise, with 72 percent predicting
higher costs per employee, compared with 58 percent last year. 
* The top reasons CFOs cited for not hiring additional employees in 2013 were
insufficient customer demand (56 percent), uncertainties about higher healthcare
and insurance costs (32 percent), and worries about the sustainability of the
economic recovery (29 percent).

Now in its 15th year, the CFO Outlook is conducted by Granite Research
Consulting and helps Bank of America Merrill Lynch better understand how
financial executives view the economy. The results were compiled from interviews
of 602 CFOs, finance directors and other executives selected randomly from U.S.
companies with annual revenues between $25 million and $2 billion. 

Interviews were conducted from mid-November 2012 to mid-January 2013. The margin
of error is +/-4 percent. The full report will be available in March. 

Bank of America
Bank of America is one of the world's largest financial institutions, serving
individual consumers, small- and middle-market businesses and large corporations
with a full range of banking, investing, asset management and other financial
and risk management products and services. The company provides unmatched
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active users. Bank of America is among the world's leading wealth management
companies and is a global leader in corporate and investment banking and trading
across a broad range of asset classes, serving corporations, governments,
institutions and individuals around the world. Bank of America offers
industry-leading support to approximately 3 million small business owners
through a suite of innovative, easy-to-use online products and services. The
company serves clients through operations in more than 40 countries. Bank of
America Corporation stock (NYSE: BAC) is a component of the Dow Jones Industrial
Average and is listed on the New York Stock Exchange. 

Visit the Bank of America newsroom for more Bank of America news. 

www.bankofamerica.com

Reporters May Contact:
Jefferson George, Bank of America Merrill Lynch, 1.980.683.4798
jefferson.george@bankofamerica.com

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